Commercial Standby Letters of Credit
F&M Bank has been a proud independent community bank for over a century. Since we opened in 1908 we’ve grown and witnessed plenty of changes in banking and the world at large. However, we’ve never shifted our focus from providing high quality financial products and friendly customer service to the people and businesses of Virginia’s Shenandoah Valley. Along the way our lending team has developed expertise in the industries that drive the local economy as well as the needs of small business owners. When you need a commercial letter of credit to vouch for your business’s ability to pay, turn to your trusted local community bank. As an independent bank, we are locally owned and make all of our lending decisions locally. We are also able to offer customers more flexibility with loan options and terms. And our rates are competitive with bigger lenders.
How do commercial standby letters of credit work?
The primary function of a commercial letter of credit is to provide assurance to one party in a transaction that the other party has the means to pay the agreed-upon amount. Commercial standby letters of credit are often used in international agreements and trades. Banks issue commercial standby letters of credit without expecting them to be drawn upon, but the option exists in the contract, giving more confidence to the seller that the buyer will come through.
When you apply for a commercial letter of credit, you’ll need to demonstrate the steadiness and solvency of your business. If approved, you’ll pay an annual fee as a percentage of the letter of credit’s total value. Depending on the terms, you may be able to cancel the letter of credit earlier than expected without paying a penalty.
What are commercial letters of credit used for?
Commercial letters of credit (LOC) are primarily used in international transactions to establish trust between buyers and sellers and keep goods moving around the world without interruption. Other types of LOCs include bid guarantees, which can help your company win a big contract, retention guarantees, performance guarantees, and advance payment guarantees.
You may find that a commercial LOC is a requirement of a business transaction you wish to enter. In other cases, businesses apply for LOCs to make themselves more competitive and attractive to potential business partners and clients. Whatever your reason for seeking an LOC, it is a guaranteed way to establish trustworthiness.
Contact our lending team today.
How could a commercial standby letter of credit help your business? Whether it’s a requirement or a strategy for generating new business, our friendly and experienced lending team can help you figure out if a commercial LOC is right for your company. Call or visit one of our branches in Harrisonburg, Staunton, and Augusta, Page, Rockingham, or Shenandoah county.