After the exporter signs a commercial contract with a foreign buyer, the domestic exporter receives the letter of credit from the buyer's bank. Because the letter of credit contains the bank payment credit, the exporter's future sales payment is guaranteed. Therefore, under normal circumstances, the bank accepts the exporter's loan under this letter of credit (the letter of credit cannot be mortgaged) for the exporter to prepare goods for use. In the future, the bank will repay the packaged loan by letter of credit. Pay attention to the qualifications of foreign importers and issuing banks to prevent malicious refusal in the future, and also review the terms of the letter of credit to avoid losses to banks due to unfavorable terms in the letter of credit; Third, it is necessary to conduct a certain review of exporters, review their repayment ability and credit standing, and prevent internal and external collusion to defraud loans. Finally, it is better to use your own letter of credit as the advising bank (the only bank in China that accepts letters of credit from foreign banks) to prevent the bank from being unaware of the adjustment or cancellation of the contract amount between the exporter and the buyer (because the change and cancellation of the letter of credit will still be sent to the advising bank instead of the actual lending bank).

2. Standby letter of credit loans

The essence of standby letter of credit loan is that foreign banks provide guarantees for companies to finance in other countries.

The signatory of the contract bears all risks, and the guarantor bears joint and several risks.