Paying the Seller’s Supplier

Paying the Seller’s Supplier involves directing payment under a letter of credit to the seller’s supplier instead of the seller, often through an assignment of proceeds.

The letter of credit commits the issuing bank to pay the supplier upon presentation of compliant documents. An assignment of proceeds transfers the beneficiary’s right to receive payment to the supplier. This can streamline transactions.

Entities involved:

• Issuing Bank
• Seller (Beneficiary)
• Seller’s Supplier (Assignee)
• Applicant (Buyer)

Critical steps include:

• The seller instructs the bank to assign proceeds to the supplier.
• The supplier presents documents to the bank.
• The bank ensures documents comply with the terms.
• The bank pays the supplier directly.

Assignment of proceeds ensures the supplier receives payment, reducing risk for the supplier and potentially improving terms for the seller.