Silent confirmations / Payment guarantees
Normally used in conjunction with sight letters of credit, the silent confirmation and payment guarantee are designed to protect Exporters from political, credit and transfer risk.
In certain cases, the opening bank does not request their letters of credit to be confirmed, or the advising bank is unable or unwilling to provide a confirmation. London Forfaiting may be able to provide the Exporter with a guarantee that fully protects the Exporter in the event the opening bank fails to make payment on the due date.
Exporters who regularly use the silent confirmation/payment guarantee, tend to have very conservative policies with respect to taking country risk on their balance sheet, but do not necessarily have the need for the liquidity normally associated with discounting.
It is important to add that the silent confirmation/payment guarantee can also be used in transactions that do not involve letters of credit. For example, promissory notes or bills of exchange with maturities of less than 90 days tend to be unsuitable for discounting, because of their very short tenors. However, the short tenors of these types of transactions make them very well suited for a silent confirmation/payment guarantee. Again, the documentation and the process for the silent confirmation/payment guarantee are consistent with London Forfaiting's philosophy of simplicity and efficiency.