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Domestic L/C Negotiation


 

Introduction

Domestic L/C negotiation means that Bank of China deducts the negotiated interest, and makes the payment to the beneficiary after it receives the confirmation letter of due payment from the issuing bank. If the issuing bank does not make payment at maturity, Bank of China has the right of recourse against the seller.

Features

1. Acceleration of the capital turnover. It can reclaim forward claims on demand, thus accelerating the capital turnover and easing financial pressure;
2. It can simplify the financing procedures. The financing procedures are simpler than those of working capital loans.

Interest Rate

The negotiated interest rate is subject to the Bank's Acceptance Bill discount rate.

Target Customers

1. Sellers have limited working capital and have to conduct business by quick capital turnover;

2. Sellers encounter temporary difficulty on capital turnover during the period between confirmation of payment from the issuing bank and receipt of payment;

3. The seller gets a new investment opportunity during the period between confirmation of payment from the issuing bank and payment collection, and the expected rate of return is higher than the bill advance interest rate.

Application Qualifications

1. The applicant shall be approved and registered in accordance with the law, and hold a business license that has passed the annual inspection or other valid certificates which fully prove its legal operation and scope of business;

2. The applicant shall have a loan card;

3. The applicant shall have an account opening permit and open a settlement account with Bank of China;

4. Customers have the outstanding forward claims with confirmation of payment by the bank;

5. The issuing bank confirming payment must be a financial institution with a good credit standing approved by Bank of China (except Bank of China's institutions).

Process

1. The seller signs the financing agreement with Bank of China and submits the export bills to Bank of China;

2. After examining the bills, Bank of China will forward them to the issuing bank for collection;

3. After receiving the bills, the issuing bank makes confirmation of payment to Bank of China;

4. After Bank of China receives the confirmation of payment from the issuing bank, the customer should submit the Application for Domestic L/C or Negotiation Contract for Domestic L/C to Bank of China, Bank of China will credit the negotiated proceeds to the seller's account;

5. The issuing bank reimburses Bank of China at maturity to return the negotiated proceeds.

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