Letter of Credit Issuance

We have a situation where a contract has been issued to a contractor who is obtaining $825,000 worth of product overseas for one of our capital projects. The supplier is requesting we issue a Letter of Credit to guarantee payment upon receipt of the goods. We are being told this is normal practice for out of country purchases of substantial value.

Our intent is to pay for the product when it is received, there is no need for borrowing.

We've never issued a letter of credit and are finding the process quite cumbersome with our bank and also quite costly.

Has anyone else out there had any experience with this or able to offer any advice?

Thanks very much
Cheryl Harding
Pitt Meadows

Comments

  • We've been thinking of adding the topic of Letters of Credit to a future MFA Sponsored Investment Webinar. Although not an investment per se, but may of interest nonetheless.
    Please let me know if you are interested in hearing more about this topic and we will arrange for a guest speaker to cover this in a future forum.

  • Shelley, I'm interested in hearing more about Letters of Credit. Thanks for offering to include it in a future forum

    Lorraine Coughlin
    Director of Finance
    Town of Gibsons

  • The September 15th Investment Forum Webinar will feature the topic - Letters of Credit. Here is the address to the registration page https://www.gfoabc.ca/events/event-details/?EventID=134
    There will be 2 speakers, a local government practitioner to speak about accepting letters of credit to the benefit of the municipality and how to establish a policy regarding this as well as a representative from a financial institution that will detail how to apply for one, various types offered etc. Hope you can join in!

  • That's fabulous Shelley! Just registered. Thank you :)

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