Letter of Credit

A letter of credit is written assurance that your business is backed by Westminster Savings Credit Union.

Letters of Credit can be useful when your business enters into contracts or agreements which require you to provide cash collateral or other security to another party to support your business transactions.

Municipalities often request Letters of Credit from property developers before development is approved.

Letters of Credit can also be useful to importers/exporters who want to minimize trade risk by establishing a legal relationship with suppliers or customers before goods are exchanged.

Standby Letter of Credit

A standby letter of credit is a written undertaking given by Westminster Savings to the party with whom your business has entered into a contract (the "beneficiary") to pay a specified amount of money in the event that your business or a third party does not meet specific financial or performance obligations.

Upon Westminster Savings’ payment to the beneficiary, your business will reimburse WSCU for such payment.

Read more about a Standby Letter of Credit

Standby Letters of Credit can be used as:

  • Bid or Tender Guarantee (Bid Bond): to ensure that suppliers submit credible offers, buyers may request a Bid Guarantee to accompany a tender. Bid or Tender Guarantees provide buyers with the assurance that they will be financially compensated in the event that a bidder does not take up the contract once it has been awarded.
  • Performance Guarantee (Performance Bond): once awarded the contract your business may be required to assure its customers of your business' ability to meet its contractual obligations. This may require your business to submit a Performance Guarantee for a percentage of the contract amount, guaranteeing your business' customer this level of financial compensation in the event that your business fails to perform as contracted.
  • Advance Payment Guarantee: if your business' contract provides for payment of stipulated amounts in advance of the work being completed, an Advance Payment Guarantee will assure your business' customer that they will be repaid the funds advanced in the event that your business fails to complete the contract. And to help your business make the most of its cash, our Letters of Credit are often mortgage secured, not necessarily cash secured, helping to free up your business' working capital for more important things.

Documentary Letter of Credit

A documentary letter of credit assures your business' international suppliers that your business will meet its obligations upon delivery of goods or receipt of an invoice (an import letter of credit).

Likewise you can also receive a letter of credit from your international customer to reduce your risk (an export letter of credit).

Read more about a Documentary Letter of Credit

If your business activities include import/export transactions and you would like to minimize your risks in international trade, then consider Documentary Letter of Credit Services from Westminster Savings.

  • Import Letters of Credit: your business can use Import Letters of Credit to provide its international suppliers with Westminster Savings undertaking that your business' suppliers will receive payment upon delivery of documents specified in the Letter of Credit within a stipulated time. As an importer using a letter of credit reduces the risk of having to pay in advance for goods or pay for anything when the documents presented by the exporter are not consistent with the terms of the Letter of Credit.
  • Export Letters of Credit: the Export Letter of Credit provides your business with your buyers financial institution's undertaking that your business will be paid, provided your business ships the goods and presents the documents specified in the Letter of Credit within a stipulated time. This reduces payment risk to your exporting business.

For more information or to obtain a letter of credit

Speak to a Westminster Savings Credit Union Business Relationship Manager at 604-528-3803 about our letter of credit services.

 

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