Managing Your Commercial Transactions

We have everything you need for simple, secure importing and exporting. Our advisors will help you choose the products and services that work for you.

Protect your company from non-payment risk

Documentary Credit

  • When you buy products from an exporter (seller), your bank can issue you a documentary letter of credit, which sets out both parties' obligations.
  • Your bank will then issue you documentation proving that the exporter delivered the merchandise according to the terms of the contract, and deliver your payment to the exporter.
  • For greater flexibility, we offer four different kinds of documentary credit.

Irrevocable documentary credit

This type of agreement cannot be changed or cancelled without the consent of all parties concerned.

Confirmed irrevocable documentary credit

 

  • When selling products to an importer (buyer), it is the importer's bank which is responsible for issuing the documentary credit and for making the payment. However, you may have concerns about the reliability of the importer's bank.
  • You can ask your bank to confirm the documentary credit. You will be asked to provide your bank with documentation proving you exported the goods according to the terms of the contract, and the bank will issue you the payment promised by the importer.
  • Generally, you will be required to pay the cost of this instrument.

 

Transferable documentary credit

When you sell products to an importer (buyer), you can ask that the documentary credit issued by their bank transfer your rights to other beneficiaries (typically the actual suppliers of the goods or services), up to the total amount of the documentary credit.

Simplified documentary credit

  • An SME that frequently does business with the same supplier can use a simplified documentary credit to accelerate processing of amounts under $65,000.
  • Unlike a conventional documentary credit, it involves just two documents: an invoice and a shipping document.

Letters of guarantee

  • When dealing with business partners abroad, you may be required to prove your creditworthiness.
  • A Bank guarantee is an irrevocable promise from a bank that your debtor will be compensated should you fail to fulfill your contractual obligations.
  • The bank will issue a payment to your client (beneficiary) upon presentation of documents proving a breach of contract.
  • We offer five types of guarantees based on your needs.

 

Bid guarantee

You may be required to post this type of bond when responding to a call for tenders for a construction project or a supply contract.

Should you withdraw your bid, refuse to sign the contract or fail to provide a requested performance bond, the beneficiary will receive compensation to continue with the bid process.

Performance guarantee

  • Once a contract is awarded, the buyer will often seek to secure it through a performance guarantee.
  • This type of bond protects your client against any failure on the supplier's part to deliver the project as agreed.
  • In such a case, the buyer can use the funds obtained through the guarantee to repair or complete the work.

Advance payment guarantee

If the buyer has given you an advance, you may be required to repay it if the deal falls through. An advance payment guarantee is a means to secure this repayment.

Financial guarantee

This type of guarantee is a promise to meet financial obligations (e.g., accounts receivable, leases, open account transactions). It can serve to endorse an obligation relating to a sale.

Standby letter of credit

  • A standby letter of credit plays the same role as a letter of guarantee and can be used in all of the above situations, particularly to demonstrate the seriousness of a tender, contract or financial commitment.
  • However, the standby letter of credit has the advantage of allowing both parties to work with neutral, universal rules set by the International Chamber of Commerce, unlike the letter of guarantee which is usually subject to the laws of the country, state or province of the issuing bank.

Documentary collection

  • When you sell merchandise to an importer (buyer), you can ask your bank to handle documentary collection. This involves forwarding the documents proving that you exported the merchandise as arranged to the importer's bank, to be presented to the importer.
  • Unlike irrevocable documentary credit, this transaction does not require the importer's bank to pay the exporter should the importer fail to fulfil its obligations.

 

Useful Articles

#
#
Investment strategy

Find out more

Short-term financing

 

Looking to cover your short-term financing needs?

Learn more about our lines of credit

Financing solutions

 

Term loans are a great way to finance working capital.

Learn about our long-term financing solutions

 

Business Investment Account

 

Are you looking for ways to invest your surplus funds?

Learn more about our BIA


TMBUSINESS CENTRAL is a trademark of National Bank of Canada.