BUSINESS & COMMERCIAL

Letters of credit

Let Alaska USA help you build relationships with new vendors and ensure prompt payment by using convenient letters of credit.

What is a letter of credit?

A letter of credit serves as a guarantee that the vendor you're working with will get paid.

You apply to Alaska USA for a letter of credit, using cash, real estate, or other business assets as collateral. Once you're approved, Alaska USA will draw up an official letter of credit with a specific dollar amount guaranteed to a specific vendor. If you are unable to pay that vendor, Alaska USA is obligated to do so, and will use your collateral to cover the amount.

What kinds of letters of credit are available?

Alaska USA offers Standby and Commercial letters of credit in amounts of $2,500 and above.

Standby letters of credit serve as an assurance to others that your business can meet its contractual obligations. They are only used as backup in case the business fails to pay. Standby letters of credit are often used to guarantee repayment of loans, to ensure fulfillment of a contract or to secure payment for goods delivered by third parties.

Commercial letters of credit help facilitate trading activity between your business and other businesses by providing a payment mechanism that is convenient for both you and your vendor. Once the conditions of the letter of credit are met by the vendor, Alaska USA will make payment on your behalf.

How will I know what to put in my letter of credit?

Alaska USA can help you through the process of preparing a letter of credit with the requirements that you stipulate.

How can letters of credit from Alaska USA benefit my business?

By guaranteeing payment, a letter of credit from Alaska USA allows you to establish relationships with vendors who may not be familiar with your business. In addition:

You can confirm that merchandise is shipped on or before a certain date.

It's safer than prepayment. You don't have to pay cash upfront before receiving and inspecting the purchased goods.

You may get better terms and prices.

You are protected since Alaska USA only pays when the vendor fulfills the specific terms and conditions you've stipulated in the letter of credit.

What kind of collateral do I need?

You can secure your letter of credit with real estate or business assets such as inventory, equipment, or cash.

What are the terms?

Letters of credit mature in one year, at which time you may apply for renewal.

What is the minimum monthly payment?

Your minimum payment is the interest that has accrued on your balance (minimum $25).

What kinds of rates and fees can I expect?

Alaska USA offers competitive rates. For current rate information, visit www.alaskausa.org or call 646‑6670 in Anchorage or (877) 646‑6670 outside Anchorage.

Fees also vary and may include a commitment fee, a late charge fee, and third party fees.

Do I have to apply again each time I need a new letter of credit?

Yes. Each letter of credit is unique and must be crafted to include specific terms and conditions for the buyer and seller.

How do I apply for a letter of credit?

Apply in person at any branch or financial center, call for an application, or download one from www.alaskausa.org.

Phone: 646‑6670 in Anchorage, (877) 646‑6670 outside Anchorage • 450‑1581 in Fairbanks, (877) 374‑5453 outside Fairbanks.

Additional contact information can be found online.

Highlights

A letter of credit can help you build relationships with new vendors and can limit your risk in commercial purchases.

Use real estate or business assets as collateral.

Low minimum monthly payment.

AKUSA 02396-I R08/27/07