The Real Cost of Playing Big in International Trade — A $2M Reality Check
In the World of International Trade: The Importance of a Letter of Credit
In the world of international trade — especially in high-stakes commodities like gold — one truth remains constant: if you want to play big, you need to come prepared. And yet, time and again, we see individuals chasing million-dollar deals who hesitate over something as basic and essential as issuing a Letter of Credit (LC).
The Cost of Doing Business
Let’s get real: a $2 million LC usually costs anywhere between 2% and 6%, depending on the bank and the country. At the high end, you're looking at $120,000. With solid banking relationships? As low as $30,000 — barely the value of a kilo of gold. Still, people say, “I have costs… I can’t afford the LC right now.”
But here’s the irony: sellers also carry heavy costs — export licenses, security, logistics, taxes — often exceeding what you’d pay to issue an LC. If you can’t afford that small fraction upfront, how exactly are you going to fund a $2M transaction?
The $2M Illusion
Let’s illustrate this with a real-world encounter.
Raj had been making noise for weeks — flashy Instagram stories, borrowed designer threads, and claims of a serious buyer for a $2M gold deal out of Dubai. Malik, a seasoned trader with two decades in the game, had seen many Rajs before. But something about his swagger made him listen.
Raj talked the talk. He shared a buyer mandate, name-dropped some banks, and nodded confidently through every Zoom call. The terms? Standard. $2M worth of gold, FOB, with the buyer to issue a basic LC.
The Stall
Then came the stall.
“Just a few more days,” Raj said. “Bank's still reviewing.”
Days became weeks. Finally, Malik called it out: “Raj, are we issuing this LC or not?”
“Well,” Raj hesitated, “the buyer has some short-term cash flow issues. We didn’t expect the LC charges…”
Malik laughed. “You’re chasing a $2 million deal, but can’t cover $30K in LC fees? This isn’t street hustle — this is international trade.”
End of conversation.
Two days later, Malik closed the same deal with another buyer. LC issued in 24 hours. Gold shipped in 72. No drama. Just business.
The Bottom Line
No LC = No trust. No security. No deal.
This space isn’t for dreamers with excuses — it’s for professionals with capital, credibility, and clarity. Real buyers don’t flinch at LC fees because they know it’s the cost of doing clean, secure, and structured business.
So if you’re not ready financially, that’s okay. But don’t knock on the $2M door holding $500 in excuses.
Level up or move aside.
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