Doing business overseas can be riskier than selling domestically, unless you have a shrewd sales representative who can negotiate an international letter of credit on terms favorable to you. Sandy Kurz of Compass Forwarding, an international transportation-logistics company based in Jamaica, N.Y., recommends pushing for the following terms when negotiating international letters of credit.
- Partial shipments. These are especially useful when a customer is purchasing a large quantity. By asking for the right to send partial shipments, a manufacturer can obtain payment for smaller batches ahead of the final due date to speed up cash flow. "Then you can fill the rest of the order on the customer's nickel," observes Kurz.
- At-sight clause. Getting paid "at sight" is about as close to cash as you can get. This means that when all the documents called for by the letter of credit are presented to the bank in charge of releasing payment on behalf of the customer, it will take about five days for the issuing bank to pay it out. Some banks in remote parts of the world may take weeks just to assemble the paperwork before being able to release funds "at sight," so make sure your sales rep qualifies not only the customer but also the customer's bank for the letter of credit.