Documentary collection is a policy that enables the exporter’s bank to receive payment from the importer’s bank in contemplation of the documentation that is tracking the shipped goods.
It is a transactional trade where exporters have the authority to empower their bank to assist them as a collection agent for the settlement of commodities and stocks shipped to the purchaser.
The documentary collection is conferred so, as according to this procedure, the exporter ships documents to the importer and then collects payment from the importer in exchange for the shipping documents along with the payment and documents transferred into their respective banks.
These shipping documents are of grave importance as they are needed for the purchaser for delivering the goods and clearing the customs. These documents are delivery documents including an insurance certificate, a business invoice, a packing list, and a certificate of origin.
Along with all these inclusions, the documentary collection also consists of the trade bill or the draft bill. This document is typically the chief document among all. The trade bill or the draft bill is a formal application for the transfer of funds from the exporter to the importer.
Basically, there are two types of documentary collection. They are as follows
Documents Against Acceptance
This type of documentary collection requires the importer to pay on a particular date as decided in the future. It embodies the time draft which obligates the importer or seller to take a pledge to pay. Once the buyer acquiesces to the time draft and swears to pay, the bank releases the very documents to the buyer.
Documents Against Payment
This type of documentary collection requires the importer to pay the face amount of the draft at the sight. Generally, this payment has to be made to the bank before the collecting bank or the buyer’s bank issues the documents. This Document against payment is also known as Sight Draft.
Proof of Funds Letter.
The proof of funds letter is the consent letter which any seller of a piece of real estate requests as a proof of funds from the buyer so that he holds the real estate piece for them until they wait for them to close the transaction.
This is more of a certainty document or letter which assures for the transaction as mentioned in it. Without this very document, the buyer will be not able to complete the transaction unhesitatingly because there will be a risk posed to the seller. In case the buyer backoffs and the deal declines then the seller would face a major setback as he took the house off the market.
In simple words, a proof of funds letter is required in the bank which uses this document to verify and check if the buyer or the party who claims to have the money actually has it or not.
Items that must be included in The proof of funds letter include the following items mandatorily.
1.)The official bank statement.
2.)The bank’s name, IFSC code, and address.
3.)Balance of funds in savings and checking accounts.
4.)The copy of the balance and money market statement.
5.)Certified financial statement by the bank.
6.)A document signed by an authorized bank employee.
7.)Photo-Copy of the online banking statement.
This detailed information about the legal documents and letters from the bank here at https://oxfordinvestbank.com/ helps in all kinds of trades and transactions without any risk and infringements.