Letter of guarantee business refers to the written commitment document with guarantee nature issued by the bank at the request of customers. Once the applicant fails to repay the debt or fulfill the agreed obligations as stipulated in the contract signed with the beneficiary, the bank will fulfill the guarantee responsibility.
Features:
1, guaranteed by bank credit, easily accepted by customers;
2. The letter of guarantee is issued according to the commercial contract, but it is not attached to the commercial contract. It is a legal document with independent legal effect. When the beneficiary makes a reasonable claim according to the letter of guarantee, the guarantee bank must bear the responsibility for payment regardless of whether the applicant agrees to pay or not, and regardless of the actual facts of contract performance. That is, the letter of guarantee is an independent commitment and basically a documentary transaction business.
Factoring business:
Factoring refers to the contractual relationship between the seller, supplier or exporter and the factor. According to this contract, the seller, supplier or exporter will transfer their current or future accounts receivable to the factor based on the goods sales or service contract signed with the buyer (debtor), and the factor will provide them with at least two services such as trade financing, sales ledger management, accounts receivable collection, credit risk control and bad debt guarantee.
Introduction:
In recent years, no matter domestic trade or international trade, credit settlement has become more and more popular. Taking international trade as an example, the utilization rate of letters of credit has dropped to 16%, and it has dropped below 10% in developed countries. Credit sales have basically replaced letters of credit as the mainstream settlement method. Under the credit trade, the management of accounts receivable and the financing needs of enterprises are the basis for the development of factoring business. In recent years, with the increasingly fierce competition in international trade, the buyer's market in international trade has gradually formed. The settlement ratio of letters of credit unfavorable to importers is decreasing year by year, and credit sales are becoming increasingly popular. Factoring is becoming more and more popular in Europe, America, Southeast Asia and other places because it can solve the problems of capital occupation and credit risk faced by exporters in credit sales. It is developing rapidly all over the world.
Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.