Global trade can be financed with a ‘Letter of Comfort /Bank comfort letter / BCL-MT799’, on behalf of the buyer and in favor of the seller. This is to establish the buyer’s financial capability to undertake the entire deal.
A comfort letter is an assurance document/affirmation letter whereby the issuing company assures of financial support to the subsidiary company of its willingness to provide financial support. (However, it cannot be treated as a confirmation letter, which could have brought a backup support). At times this letter carries the weightage to give some negotiating capacity to the agency it is issued, in case of a default.
A comfort letter does not have an expiry date but is expected to expire after the provision of the stated services. Any continuation after the stated services have been achieved would warrant a new letter of comfort to be issued. A statement of holding is another feature to be expected.