LC Discounting
Customised solutions for structured trade.
LC or Letter of Credit Discounting is actually a short-term credit facility offered by the banks to the clients. In this process, the banks or NBFCs purchases all the documents or bills produced by the client and which are backed by LCs and pay the money to the client against discounting interest for the usance period as per the terms of LC. However, sometimes suppliers of goods look for a quick payment without waiting for the end of the tenure of the LC usance period. That is why the letter of credit backed bill discounting or LC discounting is used. With the help of the LC backed bill discounting, the bank offers the supplier an advance payment immediately without waiting for the LC tenure to end. This is particularly helpful for businesses to get working capital funds in quick time.
Unlimited & Collateral Free
*T&C Apply | Rate of Interest Linked with Repo Rate and subject to changes as per RBI circulars
Know More about LC DISCOUNTING
The following people are eligible to apply for LC Discounting:
∼ proprietors, partnership firms, private or public companies, retailers, traders or any other business owner engaged in the business of service, manufacturing products, or trading sectors.
∼ The borrower should be a minimum of 21 years of age when applying for the loan and should be no older than 65 years on maturity of the loan.
The following documents are required to apply for LC Discounting:
∼ FY23 Provisional financial
∼ Last three year audited financials (FY-22, FY-21, FY-20): ITR and Computation, Balance Sheet, Profit & Loss A/c Schedule, Tax Audit Report – Form 3CB, 3CD
∼ Sanction Letter of all loans along with Schedule & updated loan sheet
∼ Last 12 months bank statements of all banks
∼ Address proof (Telephone bill or Electricity bill) – Latest (within 60 days)
∼ Udyam Registration Certificate
∼ Trade reference: 5 Buyers & Suppliers contact details along with the volumes for the last two years and 2 personal references (Friends and Relatives)
∼ GST Certificate & GST Return from April 22 to till date
∼ Profile of the company (History, Product, Operation)
∼ Stock, Debtors & Creditors statement from April 22 to till date
∼ Month-wise sale list from April 22 to till date
∼ Projections / CMA
∼ Copy of LC (Letter of Credit)
Proprietor & Co-Applicant Documents
∼ KYC – PAN Card, Aadhar Card
∼ Photographs of each individual
The following documents are required to apply for LC Discounting:
∼ FY23 Provisional financial
∼ Last three year audited financials (FY-22, FY-21, FY-20): ITR and Computation, Balance Sheet, Profit & Loss A/c Schedule, Tax Audit Report – Form 3CB, 3CD
∼ Form 26AS (if any)
∼ Sanction Letter of all loans along with Schedules
∼ Last 12 months bank statements of all banks
∼ Business Incorporation Date Proof – PAN Card
∼ Partnership Deed
∼ Udyam Registration Certificate
∼ Address Proofs (Telephone bill or Electricity bill) – Latest (within 60 days)
∼ Trade References: 5 Buyers and 5 Suppliers contact details along with volumes for the last two years, and 2 personal references (Friends and Relatives)
∼ GST Certificate, GST Returns from April 22 to till date
∼ Stock, Debtors & Creditors Statement from April 22 to till date
∼ Month-wise Sale List from April 22 to till date
∼ Projections / CMA
∼ Profile of the company (History, Product, Business)
∼ Sample Agreement / Order Copies of leading customers
∼ Group Company Financials and Sanction Letter
∼ Copy of LC (Letter of Credit)
Partner or Individual Documents
∼ KYC – PAN Card, Aadhar Card
∼ Photographs of each individual
The following documents are required to apply for LC Discounting:
∼ FY23 Provisional financial
∼ Last three year audited financials (FY-22, FY-21, FY-20): ITR and Computation, Balance Sheet, Profit & Loss A/c Schedule, Tax Audit Report – Form 3CA, 3CD
∼ Form 26AS (if any)
∼ Sanction Letter of all loans along with Schedules & updated loan sheet
∼ Last 12 months bank statements of all banks
∼ Business Incorporation Date Proof – PAN Card
∼ MOA (Memorandum of Association) and AOA (Articles of Association) + Certificate of Incorporation
∼ Address Proof – Telephone bill or Electricity bill (Latest within 60 days)
∼ Udyam Registration Certificate
∼ CA Certified Net Worth Statement of Directors and Shareholders
∼ Trade Reference: 5 Buyers & 5 Suppliers contact details along with volumes for the last two years, and 2 personal references (Friends and Relatives)
∼ Stock, Debtors & Creditors Statement from April 22 to till date
∼ Month-wise Sale List from April 22 to till date
∼ Projections / CMA
∼ GST Certificate & GST Returns since April 22 to till date
∼ Profile of the Company (History, Product, Business)
∼ Group Company Financials and Sanction Letter (if any)
∼ Copy of LC (Letter of Credit)
Directors Documents
∼ KYC – PAN Card, Aadhar Card
∼ Photographs of each individual
∼ 8% to 10% per annum
0.5% to 2% one time on the sanctioned loan amount.
The processing fee depends on the credit decision of the Financial Institution providing the sanction. At no given point does ARS Capital / its employees / partners solicit Processing Fee to be paid to our own account. This fee is directly payable to the Financial Institution.
Frequently Asked Questions about LC DISCOUNTING
∼ The bills should be drawn under irrevocable Letters of Credit issued by a commercial bank in India.
∼ The bills drawn must be in strict conformity with the terms of the LC.
∼ The LC must have a Usance period. (At sight LCs cannot be discounted.)
∼ Bills of exchange should arise out of bona-fide commercial or trade transactions.
Tenure is up to 180 days.
It is discounting of export bills / invoices under a usance Letter of credit. This discounting is done on a post acceptance basis (in other words, after acceptance to pay on due date has been received from the LC issuing bank). Given the risk assumption is on the LC issuing bank, financier needs to have some credit appetite on the issuing bank. Funds are made available to exporters bank via banking channels.
There are a few factors that determine the acceptability and pricing of the transaction. These are:
∼ LC issuing bank – If it is a well-rated bank, interest rate will be better. If it is an unknown small bank, the financing bank may decline the transaction.
∼ Country of the LC issuing bank – The rating of the country plays a role in the overall pricing (especially if confirmation is to be added). Transactions involving sanctioned countries will be declined.
∼ Tenor of the post-shipment credit – LIBOR will change depending upon the tenor, as might the spread.
Funding comes with its own associated risk . Since it is LC backed funding, applicant bank guarantees the payment to the funding done by negotiating bank . However, we have taken several steps to mitigate the risk – both strategically and operationally.
ROI starting @ 8.5% p.a.
*T&C Apply | Rate of Interest Linked with Repo Rate and subject to changes as per RBI circulars
+80 MORE
Portfolio Clients we Work with
Discount LC for Service provided
*T&C Apply | Rate of Interest Linked with Repo Rate and subject to changes as per RBI circulars
