Case Study: Securing an Irrevocable Documentary Letter of Credit for Grain Import
Case Study: Securing an Irrevocable Documentary Letter of Credit for Grain Import
A mid-sized agricultural distributor needed to import 25,000 metric tonnes of grain. The supplier, based overseas, demanded full payment protection before loading. Local banks were hesitant to extend credit due to the client’s limited international trade history. Financely stepped in to structure and secure an Irrevocable Documentary Letter of Credit (LC) that met both parties’ requirements and closed the trade on time.
The Challenge
The importer had secure domestic offtake contracts but lacked the credit rating to issue a bank instrument that would satisfy the international supplier. Traditional prepayment terms were out of the question due to liquidity constraints. The supplier insisted on a bank-confirmed LC, payable at sight against documents, before agreeing to load cargo.
Our Role
Financely acted as the client’s capital advisor and arranger. We assessed receivables, verified offtake agreements, and packaged the transaction into a format that international banks would underwrite. We ran a fast-track RFP process with our banking network and secured a confirming bank with appetite for agri-commodity trades.
Solution Delivered
- Issuing Bank: Local commercial bank in the importer’s jurisdiction.
- Confirming Bank: Top-20 global bank headquartered in Europe, adding confirmation to de-risk counterparty exposure.
- LC Terms: Irrevocable, payable at sight, governed by UCP600.
- Collateral: 20% cash margin + assignment of receivables from downstream buyers.
- Documentation Flow: Payment triggered upon presentation of Bill of Lading, SGS quality/quantity certificate, commercial invoice, and insurance certificate.
Results
The supplier accepted the terms and shipped within 14 days of LC issuance. The importer secured the grain at competitive pricing, protected cash flow by avoiding prepayment, and built credibility with both domestic offtakers and international suppliers. The banks involved gained comfort through structured risk allocation and receivable assignment.
Key Lessons
Why This Matters
Access to international grain supply depends on payment certainty. For importers without long trade histories, structured solutions like confirmed Letters of Credit are the difference between stalled negotiations and secured shipments. Financely ensures the structure works for banks, counterparties, and clients alike.
This case study is for informational purposes only and does not constitute legal, banking, or investment advice. Each transaction is subject to independent credit approval, compliance checks, and final documentation. Financely does not guarantee funding outcomes and operates strictly on a best-efforts advisory basis.
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