Using documentary credits when you export goods or services means that the importer's bank commits itself to paying you when the conditions of the credit have been met. This offers a number of advantages:
- Payment guaranteed by the importer's bank prior to shipment
- Enhanced security of payment at the agreed time
- Enhanced security that the order received will not be cancelled or changed without your agreement
- Improved liquidity as payment often can be made shortly after shipment
- Possibility of extending security to subcontractors through the documentary credit
- The possibility of financing
It is important to note that the importer's bank will make payment only after you have complied with all its requirements and conditions. You should therefore examine the documentary credit carefully when you receive it.