If you are new to the business of imports you may be looking for sources of financing. You may need to also look for someone to tell you how the goods need to be shipped between other things. One tool you need to know very well is Documentary Credit. This is a financial instrument that provides protection to the importer and the exporter.

Apart from the documentary collection as a means of payment and not a means of financing, companies can finance their imports by documentary credit, the advances in foreign currency bonds and customs.

To remove the merchandise, the importer must hold a number of documents: transport tit, miscellaneous certificates, customs documents, etc. An exporter wants to be sure to deliver the goods only in exchange for the payment and he or she will send these documents to the importer's bank.

Documentary credit gives advantages to the seller because he or she is guaranteed that the bank will pay for the merchandise even if the buyer does not have the money at the moment.

However, the seller can send the documents after shipment of the goods and then he runs the risk that the buyer cannot pay or does not want the goods.

Without documentary credit, the seller has two choices when the buyer defaults payment: one is to the take the merchandise back, the other one is to find another person in the port of arrival that is interested in buying the good from him or her.

The documentary credit is a commitment taken by the importer's bank to the exporter to ensure payment for the goods (or the acceptance of a draft) against delivery of documents evidencing the shipment and the quality of goods under the Contract.

A form of documentary credit is also frequently used on international transactions, that is the standby letter of credit. This document is helpful when the something in the agreement is broken.

Documentary credit functions as a temporary form of credit because both (sellers and buyers) need to go to banks that act as intermediaries in the transaction. The bank approves the credit and pays the seller when the quality and quantity are as expected.