Bill,
Most of our vendors in Asia use the LC as the collateral to finance their manufacturing.
They don’t offer terms.
I’m sure depending on the relationship, having third party’s guaranteeing payment may or not be necessary.
We were running 8-12 cans a month, all backed by lc’s.
As I’m sure you are aware, many of the smaller manufacturers rely on government financing to fund their export operations, so using LC’s benefits both sides.
45 days on the water is an interest cycle in transit.
I think some of our Thai and Malay suppliers had a subsidized 90 day loan from their gov’t, and if the merchandize didn’t clear customs and FDA by then they were doubly penalized.
No cash from me, huge interest and shipping costs on their end, and then finally, no FDA approval meant their product would be sold into the industrial market at about $.10 on the dollar.
The LC at least guaranteed payment if they cleared.
