Payment Assurance for You and Your Beneficiaries

Your buyer or seller, especially in a foreign market, can pose to be a formidable barrier when it comes to your trade operations. However, when you use tools like a banker’s guarantee or Standby Letter of Credit, the entire trade can function in a hassle-free manner. What this essentially means is that in the event that either party fails to fulfill their contractual obligations, the bank will ensure that the beneficiaries’ payment is honored upon receipt of a claim, in compliance with the terms of the guarantee.

What is the Required Process?

The process begins with the buyer and seller entering into a mutual contract, in line with the requirements of a banker’s guarantee. The parties are the applicant and beneficiary, respectively. The applicant approaches the issuing bank for documentary credit, drawn in favor of the beneficiary. The issuing bank sends instructions to the advising bank in the seller’s country to correspond the letter at the beneficiary’s end. Once the advising bank gives its confirmation, the guarantee is issued and the hard copy of the same is sent to the beneficiary.

Advantages a Letter of Credit to the Seller

With an appropriate banker’s guarantee, the seller is assured that full payment will be honored at the agreed time. It is a method for secure payment, as long as the set conditions are met. It also minimizes collection time. Here, the risk associated with non-payment lies with the bank, as opposed to the beneficiary. Also, on issue, the seller has easy access to any form of financing. It also enables them to transfer the full or partial value to a third party, such as in the case of raw materials or associated spare parts, etc. Also, currency fluctuations are mitigated by such credit documents.

Advantages to the Buyer

It provides security cover for the buyer as well. It ensures that the seller will honor his side of the trade, thereby protecting the buyer from non-performance and damaged goods. He can also instruct the contact to hold safeguards for him, such as good inspection, time of delivery and quality control. Also, the main benefit is that cash is not tied up. The buyer does not have to pay until he receives the title of the goods. Repeated use of this tool helps increase credibility in the international markets.

Thereby, through a banker’s guarantee, the buyer and seller are able to maximize control, mitigate high risk levels and optimize profits in relation to international trade operations.

Which Credit Card offers Good Freebies in Singapore?

Cash back cards pay you a certain amount every time you use them. This could translate to hundreds of dollars a year, when used optimally. The top cards pay an average of 5% cash back at selected merchant outlets. However, they also offer incentives for other regular purchases.

Credit cards typically come with some extremely lucrative offers; so why ignore the best, especially, when they offer so much? Apart from the convenience of instant money, the option of having rewards and offers is one of the biggest advantages of plastic money. While options like fancy restaurant discounts, birthday discounts and travel upgrades are fairly common in cash rebate cards, there are those that offer much more.

Hand-picking the Benefits 

An important criterion that comes into play while choosing a card is the goodies that it brings along. Sometimes, a few perks can prove to be more than useful. Also, one would want to pick a cash rebate card that has benefits for the entire family. While we think of additional benefits on entertainment related services, such offers in daily needs can be rather useful, especially for a large family with kids. Here are a few highlights of such family cards:

1.      Daily Essentials: Rebate options are available in major petrol stations and hypermarkets in Singapore and Malaysia, such as TESCO and AEON BIG.

2.      Health & Wellness: These cards also give benefits at chain stores like Watsons personal care stores and the Guardian, where you can buy personal and health care products for the entire family at a rebate.

3.      Fast Food Delivery: A weekly outing is more than common, with the entire family stopping at places like McDonalds, Pizza Hut and KFC, to name a few. And when you get more from your outing through your cash bank cards, you’ll be “lovin’ it” all the more!

4.      Other Retails: Many retail stores are also covered under such cards. You have the option of enjoying cash back at kids and mothercare outlets, online stores and book stores.

Maybank Family & Friends Platinum MasterCard is a classic example of the above features. Apart from offering the said 5% on the selected merchant outlets, it offers a 0.3% rebate on other purchases. It goes on to open the doors for a host of other privileges in Singapore, Malaysia and Indonesia as well. These privileges and discounts are usually detailed on the company’s website.

What is the Difference between Commercial Banks and Investment Banks?

When you go to an investment bank, their loan structuring team can give you advice on how your company can construct its loan. They follow different parameters and conduct a thorough analysis as to what elements can be incorporated. However, if they happen to have a commercial banking division, it does not necessarily mean that they will also approve your loan, just because you have consulted them on the same. Financial institutions usually operate two separate divisions for commercial and investment banking.

Relationship between the Two

So, irrespective of whether the structuring bank provides the loan or another bank sanctions it, two separate fees are charged. While one is for the advice provided, and other is for loan processing. Nonetheless, an investment bank with a lending division might give you the best terms. This means that if a bank offers multiple products, such as in the above explained illustration, it can afford to charge less for its products.

From this we understand that the primary function of a commercial banking entity is loans and advances, while an investment bank provides strategic advice to companies in the areas of acquisitions, divestments, capital market products and loan structures.

Commercial Banks

A commercial bank caters to millions of customers. They charge interest on loans, which is their primary source of revenue. They also provide standardized services, such as:

1.      Accounts management – Savings, Current and Overdraft accounts

2.      Credit and debit card facilities, both international and domestic

3.      Insurance and related services – Home, vehicle, travel, life, accident cover, etc

4.      Mortgage and personal loans – Home, student, car, etc

Owing to the fact that commercial banking services are their forte, these institutions do not specialize in providing strategic advice to businesses. However, they do provide a detailed presentation of their various products to the consulting company. These options are made available to the company, without the remittance of expert advice.   

Investment Banks

Unlike commercial banking, investment banks are a niche establishment, catering to just a few hundred core customers. They offer bespoke advisory services. So, a layman cannot go in to deposit money or ask for a personal loan. They assist companies with mergers and acquisitions, and provide advice on corporate related financing. Their main source of revenue is their charging fee and said commissions for their business. They usually have different teams of experts on board, in order to provide specialized subject-related aid and services.