The main advantages and disadvantages of a documentary credit are summarised in the following table.
|ADVANTAGES||It assures that the goods are sent prior to making payment.||It guarantees payment collection upon presentation of the correct documents.|
|It offers solvency.||It offers a finance option.|
|It can be used by the importer to negotiate on price, since payment collection is guaranteed for the exporter.||Access to new markets, which businesses might not enter without a guarantee of payment collection.|
|DISADVANTAGES||Banks and financial entities do not check goods, and payment must be made upon the presentation of correct documents.||As the most complete means of payment/collection, monitored exhaustively by banks, it also charges among the highest fees.|
|The Bank must approve operation risk in order to issue the documentary credit.||More complex means of payment collection: difficulty drawing up the required documentation.|
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