Bank Comfort Letter

Bank Comfort Letter

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.

Apply For Bank Comfort Letter

Relevance of Bank Comfort Letter.

What Is Bank Comfort Letter ?

An auditor issues a comfort letter affirming the viability of the report which is ultimately to be issued by him, but is not ready at the time of the issuance of the letter of comfort. In this case, the financial content is pre-confirmed though. Obviously there is a due diligence is held by the auditor, under the Security Act of 1933, wherein the existing information is provided to the auditor to check and be assured.

The requirement is sent to us by the buyer (Client-A). The letter has to be supported by either a duly filled up Irrevocable Corporate Purchase Offer (ICPO), FCO (if applicable), and a MOU/contract between the buyer and the supplier (Client-B). It gives a tentative valuation of the deal being undertaken.

A formal approval from our side requires a due diligence to be carried out about the genuineness of the proposed transaction. We charge a fee for the activity (usually 20% of the proposed deal).

We draft a service agreement between Client-A and ourselves

We proceed to activate the BCL –MT799 with the relevant documents shared by Client – A, in 2 banking days from a well rated Bank, normally a European one.

BCL is a Bank-undertaking about the financial strength of the buyer, to be used during an import-export transaction, to honor a payment in time.

Trade deals are smooth with an in-time payment, which can be safely assumed with a third party assurance in the form of a BCL-MT799. It is not a payment guarantee, but a SWIFT message from the buyer’s bank about the proven fiscal robustness of its client.

Our services are in addition to the BCL –MT799 which is timely and watchful to ensure the buyer’s deal to go through without any hassle, even in case of unforeseen circumstances. Our efficiency comes from years of trading experience. We see to it that the issued letter of comfort does not invite any unnecessary legal formalities, tax liabilities or unnecessary risks. We ensure that all the statements mentioned in it are valid based on relevant facts and opinions containing a disclaimer, a well-described outline of the credit service. It should also have evidences that the all involved parties are in knowledge of the issuance of such a letter.

We ensure that the comfort letter descries about the target services without any expiry date, without any mandated pre-condition .

Types of Letters Of Comfort

Bank Comfort Letter (BCL) is a document issued on behalf of its client (buyer) to the supplier. Although guaranteeing the seller about consistent trade, it does not affirm payment. Banks issue the BCL accompanied by a signed Purchase Order or a recorded Memorandum of Understanding.

In this case, the BCL helps the supplier to send the buyer a large shipment in credit. It acts like a collateral or mortgage helping the client to consolidate business with the purchasing/credit.

The Benefits Of Letters of comfort

Company’s Comfort Letter help the client get credit at a subsidized rate, which is usually a difficulty with a startup. There is a risk factor without credit history, so it is the potential idea which gets supported without any historical evidence. It is a great proof of conviction about the success of such ideas. We think it to be a great service to unburden the new entrepreneur with this kind of letter of comfort.

Underwriter’s Comfort Letter helps the insurer to be convinced of probable misstatements and financial omission. They affirm that due diligence with documentary checks have been carried out to provide such assurance.

Accountant’s Comfort Letter confirms about the borrower’s financial stability in the lines of the financial statement provided which can only be higher given the confirmed balance sheet.

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