Bank Comfort Letter BCL (MT-799) is a written undertaking issued by a bank on behalf of a their client/buyer who comes into contract to buy large volume of oil from a seller confirming buyer’s financial ability to fulfill their commitment in respect of agreed contract terms and conditions.
A Bank Comfort Letter, also known as Bank Capability Letter also shows that the buyer has sufficient funds or is financially capable to complete the business deal. In other words, BCL is an undertaking that assures a seller that a prospective buyer has the much-needed financial strength to conclude a business transaction.
However, it should be clear that the Bank Comfort Letter (BCL) does not mean any assurance of payment. In other words, BCL is a statement of fact not a promise of financial obligation or commitment by buyer’s bank. It is a Swift message from the buyer’s bank that asserts the buyer’s track record with their financial standing.
No seller wants to load a vessel only to arrive at point of discharge and get stranded. As a seller, you want to ensure that you are dealing with someone who is financially capable. You want to look for credible buyers so as to always be on the safe side most especially when engaging in trade deals that involve large quantity of supplies.
When a buying company provides a BCL, it shows their fiscal affluence to execute the transaction without any hitch. It is issued by their bank and addressed to the supplier in connection to the Irrevocable Purchase Order or signed Sales & Purchase Agreement.
Smart sellers don’t waste their time with a buyer who’s being denied BCL by its Bank at the initial stage of a transaction. They see such buyer as ‘’super time waster’’ that doesn’t deserve any form of attention. It’s a fact that a buyer whose bank are not ready to verify at the initial stage of a transaction is most likely not going to have access to any financial instrument such as LC, BG, or SBLC required for payment for cargo.
How Reliable is Bank Comfort Letter?
As stated earlier, Bank Comfort Letter is not an assurance for payment. Ability to pay is different from willingness to pay hence, the need for sellers to be very careful when considering BCL as an option. The buyer may choose to spend his money on some other things instead of paying for your cargo.
Having said that, BCL is still an integral part of business transactions hence, should not be written off. Every business organization and businessman must ensure they are noted for integrity as this will encourage others to soften their business procedure when dealing with you.
Diesel Nigeria may and may not accept BCL from you if we are not sure of your integrity or have not done any business with you in the past.