EntrepreneurialFinance-Ch12

EntrepreneurialFinance-Ch12 - Entrepreneurial Finance For...

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Entrepreneurial Finance For New and Emerging Businesses Special Edition James McNeill Stancill © 2008 James McN. Stancill - All Rights Reserved
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Chapter 12 LETTERS OF CREDIT
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3 Simply stated, a letter of credit is a “letter” from one bank to another instructing the second bank to do something . Letters of Credit trace their origin to the middle ages in England. Traders sailing the world needed some way to pay for their purchases. In America, we used Finance Companies extensively instead of Letters of Credit. LETTERS OF CREDIT
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4 There is one point to keep in mind when thinking about Letters of Credit: Banks do NOT have to issue letters of credit ; they do so as an accommodation to their customers . Even though banks charge for their “service”, they are doing the business a “favor”. LETTERS OF CREDIT
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5 GENERAL FEATURES OF A L/C Purpose Term Transferability Place of payment
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12 TWO BASIC TYPES OF   LETTERS OF CREDIT International Domestic
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13 DICOTOMIZING L/Cs Revocable L/Cs Can be terminated at will or by the Occurrence of Some Event. Irrevocable L/Cs CANNOT be terminated by the issuing party.
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Documented L/Cs Means that merchandise is involved Clean Letters of Credit Means “clean” of documentation = no merchandise involved . DICOTOMIZING L/Cs
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This note was uploaded on 02/11/2012 for the course BUAD 497 taught by Professor Degravel during the Spring '07 term at USC.

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EntrepreneurialFinance-Ch12 - Entrepreneurial Finance For...

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