Buying covered letter of credit is one way that many people find from having quick access to buying a good or service. The purpose of this type of transaction is to anticipate the dream without having to wait for the entire duration of a consortium. But is it worth it?
Buying a contemplated letter of credit may be advantageous
Often, buying a contemplated letter of credit can hide risks. In order not to fall into traps, it is essential to surround yourself with information that proves the veracity of the document. In addition, it is necessary to observe whether the rules agreed previously in contract meet the objectives of the future buyer.
Another recurring question about selling and purchasing a contemplated letter of credit is about the legality of that transaction. Is this situation foreseen in the law that regulates the performance of the consortiums in Brazil?
Let us now clarify all the advantages and disadvantages of buying a contemplated letter of credit from a consortium.
What are the risks of buying a letter of credit?
It is not possible to predict when the consortium will be contemplated. It may take years before he receives the right to acquire the goal agreed upon in the contract. Thus, given a long time elapsed, it is possible that the shareholder’s plans have changed in the middle of the way.
When this occurs, the shareholder does not want to lose the money invested. Then, upon receipt of the letter of credit, he may express an interest in passing on to a third party the right to such credit.
Thus, another person can assume the financial obligations with the group. It immediately receives access to the acquisition of the good or service.
Is there a risk of a hit?
Sometimes, because the buyer does not know all the procedures involved in the transaction of buying and selling contemplated quotas, there is a great risk of falling in a blow.
There are many reports of fraudulent operations. They promised access to supposed letters of credit that did not even exist, or that had not yet been contemplated.
There are also other practices that may warn of the imminence of coup:
- Request for prior money as a “sign” to secure the deal;
- Not having the support of the administrator in which the contemplated letter of credit is submitted;
- Do not require access to all information on the quota contemplated.
It is also important to emphasize that the person interested in buying a letter of credit will have his financial profile evaluated by the administrator of the consortium. Therefore, the risk of non-approval still needs to be considered.
If this happens, he will not be able to get on with the business. And if you have anticipated any value with the illusion of “securing the transaction,” you may have trouble getting that amount repaid. Be very careful with this practice!
Also be aware, as the consortium administrators do not broker the sale of the letter of credit contemplated. They only provide support in obtaining information between sellers and buyers.
That is why many people prefer to buy a pool quota early in the group. In this way, the consortium has the advice of a specialized company.
Is buying a contemplated quota of consortium legal?
According to the Brazilian Association of Consortium Administrators (ABAC), based on Law 11,795 / 08 , which provides for the consortium system in the country, the transfer of contract to third parties is permitted. But it must be in accordance with the requirements established by the consortium administrator.
Therefore, before buying a contemplated quota, it is necessary to check if the agreement allows the purchase and sale transaction of the letter of credit to be made.
The interested party must also be attentive to the conditions that involve this transaction. It is common for administrators to cover transfer fees from one consortium to another.
There are also other expenses that the interested party in purchasing letter of credit contemplated must observe. Let’s now know what they are.
Is it worth buying a letter of credit?
As we have seen, the letter of credit is a document that seals the purchase of a good or service. Participation in a consortium requires planning, as there will be obligations and duties in relation to the group formed.
Before buying a contemplated letter of credit, you have to know that it is usually more expensive than the quota of a consortium. This happens because the consortium that intends to sell its charter adds an extra value to the total that was invested until the moment of sale.
This practice is known as goodwill, which is nothing more than a profit obtained on the operation.
That is, in addition to the amounts invested in the settlement of the installments, the buyer of the contemplated quota will also have to bear an additional amount to execute the transaction.
Doing the math
Let’s imagine that the reason that is leading you to look for a letter of credit already contemplated is the immediate need to acquire a good. In this case, compare this option with other credit modalities such as financing, for example. In the end, the total cost of the quota must be lower to be more advantageous.
When doing the math, do not forget that the consortium administrators charge fees and charges . In addition, the value of the installments is adjusted annually by market indices. These include the National Construction Cost Index (INCC) and the General Market Price Index (IGP-M). This means that, over the years, the plots will become larger.
With all the calculations in order, be sure to check other important items before closing any deal.
To help you with this evaluation, we have made a check list with the points that need to be observed when buying a contemplated letter of credit.
9 tips on how to buy a letter of credit contemplated with security
- Confirm that the consortium administrator in question is authorized by the CCB Bank to operate;
- Check the existence of the quota and its status with the consortium administrator;
- Read the contract to find out the rules for the case of buying and selling quotas contemplated;
- Understand very well what are the obligations and duties that both parties need to take to avoid distorted negotiations and that damage one side;
- Observe the financial obligations that you must pay to the consortium. See also what are the indices that will serve as the basis to readjust each installment over the years;
- Confirm that the value of the letter of credit contemplated is consistent with the value of the asset that you wish to acquire or of the service you wish to contract;
- Make sure about any rules established for the acquisition of the good or service included in the letter of credit;
- See if the consortium asks for any collateral in exchange for the release of the letter of credit. For example, in the case of real estate, it is common for the administrator to accept as collateral another property of similar value;
- Calculate the fees and expenses involved in the transaction of acquisition of the good or service: deeds, fees, records of the guarantees provided.
To close this checklist, it is crucial to know:
- Buyer and seller of quota have joint obligations. That is, they need to be aligned throughout the negotiation, as documentation and guarantees from both sides will be required to complete the transaction.
- The quota buyer undergoes a credit analysis by the administrator so that he can prove that he is able to honor the commitment. This avoids risks to the progress of the group.
- The admins only give ok in the transaction after all these items have been checked.
If you are interested in acquiring a good or service, it is important to understand what the consortium types are and how they work. Also ask for an online quote .