The call was a tough one: Our client had a written contract with open terms stating that they would have 45 days to pay their bill – end – but on the Friday before the Monday that the product needed to ship our client received a call and the supplier demanded 50% up front or the product wouldn’t ship.

If you’ve had this happen please share what you did via our blogs as we are sure others would like to know!

Of note: This was the first of eight $90,000 shipments to a large customer and there would be more business to follow … unless these goods didn’t ship and ship on time.

To make this even more complicated this was occurring right before the Christmas Holiday and the receiving customer would be shutting down for two weeks so this shipment had to go and had to go on time. The loss of a day wouldn’t cost a day: It would cost over two weeks because of the shutdown!

That said: We were called and after working through the weekend and communicating with the supplier’s office all day Saturday by the Monday morning we had negotiated with the supplier a way to get the supplier comfortable and the product released in time to avoid late delivery penalties. How?

First off we tried to understand why this was happening but could not so we needed to deal with the issues and sort out the facts later.

Enter the Letter of Credit: A Conditional Letter of Credit that is. How does this work?

A funder/lender deposits money to cover a requirement and so long as the supplier completes the work and meets the terms and conditions defined in the Letter of Credit then the money is theirs and there is nothing the buyer can do. It’s not ‘Cash Up Front’ … but it’s close. What this does is eliminate a buyer from playing any games … and too the supplier in most cases.