What Are Bank Instruments and What Should You Keep in Mind?

Starting a business or expanding an enterprise takes a lot of time and effort. But other than that, you also need the willpower and financial backup to help boost your profit margins. This is where a bank comes into the picture, helping you out with some effective financial solutions that will get you going. Here are some of the services provided by bank instrument providers that you should be aware of;

Cheque and Bank Drafts

Cheques and bank drafts are both documents that are issued by a specified banker and payable on demand. It is a written order, signed by the client, directing the bank to transfer the particular sum of money to the other person’s account. There are different types of cheques that can be availed from the bank for quick and safe transaction of money.

Letters of Credit

Letters of credit is basically a bank instrument that helps establish international trade relations between different parties. The LCs are issued by the bank, stating the terms of the financial credit, interest rate chargeable and other conditions that are applicable to the exchange. These documents are drawn between the buyer and the seller of goods across borders. If the client fails to repay the amount due then the bank is liable to pay on their behalf.

Standby Letters of Credit

The standby letters of credit work pretty much the same way as the LCs do. The only difference between the two is that, in SBLCs the responsibility of the bank increases considerably. These financial instruments state that the bank is endorsing the client and is liable to pay on their behalf in case of any future hassles. It is usually seen as the last resort for any company to clear their dues. Also, being supported by a well-known bank is a great boost to your credibility. The seller, in turn, has some assurance that their money is not lost.

Bills of Exchange

Bills of exchange are also another type of bank instrument that is issued by the bank to facilitate financial transactions. These documents are used for both local and international trade operations. It is an unconditional order of payment that has to be signed by the drawer that mentions the amount of money and the interest rate specifically as well.

Business in UAE is booming, and with these bank instruments traders now have better opportunities to establish their presence in the market. You can call us now or reach out to us via email to know more.