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What is the standard procedure of LC refinancing in UAE?

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تم إضافة السؤال من قبل Faisal Asghar , Team Leader/ Manager Audit , Bank Alfalah Limited
تاريخ النشر: 2016/12/06
Nevert Badi
من قبل Nevert Badi , Commercial / Tendering Manager , Armada Group

Refinancing is done through several methods such as:

1- Transferring the credit to a second beneficiary (in case the L/C is transferable).

2- Issuing a Back to Back L/C to the source of goods in subject.

3- Issuing a separate new L/C with terms as close as possible the master L/C.

 

Refinancing highly depends on the credit rating of the entity as a whole, before the Bank considers giving credit limits to a company, there's a series of procedures that vary from one country to another depending on level of reservation.

 

In general there are some common practices that a bank goes through to consider financing or not based on the score of the applicant:

1- Evaluation of the Financial Statements (Balance sheet) for the last 3 or 5 years.

2- Evaluate the cash flow v.s. budget.

3- Evaluate the registration status & compliance to the local laws & regulations.

4- Explore the possibility of having a collateral (real estate, bonds, etc.).

 

Based on the score of the company, the Bank can determine the percentage of cash collateral that a company should deposit prior to issuing the L/C.

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