Loan Against Trust Receipt (LATR)

The objectives of this article is to analyze the extent of loan against trust receipts (LTR) facility given by the commercial banks to their clients i.e importer, exporter and entrepreneurs against letter of credit (LC). The usual duration of this facility is 90 days but some cases the repayment time could be extended upon request of clients. On the other hand, clients may request to the bank to converted the facility into a term loan.

What is LATR?

Loan Against Trust Receipt (LATR) is a short term loan provides to the importer to settle the payment of imported goods. The title of the goods is held by the bank until the importer settle the payment but the buyer can take possession of the goods on trust for resale before paying the bank on LATR due date. LATR financing is applicable to imported goods under documentary credit.

Advantages of LATR Financing

An importer may enjoy the following benefits under LTR/ Import Invoice financing:

  • Documentation of this facility is easier than any other facility of the banks.
  • Processing time is lesser than term loan or traditional financing.
  • Though it is given for 90 days , but sometimes it can be extended to 1 years (renewable facility exists).
  • LATR also given to exporter to purchase raw materials, packing materials etc.
  • Clients’s working capital or cash flow is not tied up because LATR increase the present cash flow that strengthen the financial ability.
  • Financing can be up to 100% of LC value, LC collection value or Invoice value.
  • Credit terms enjoys that are pre-approved by the bank and payment made along with interest on maturity.

Prerequisites of enjoying LTAR

The clients have to maintain the following prerequisites for enjoying the Trust Receipt (TR) financing & Import Invoice financing:

For Trust Receipts Financing:

  • The TR Agreement to be duly executed
  • Bill of Exchange to be accepted by the buyer
  • TR facility line of credit to be granted by the bank

For Import Invoice Financing:

  • A declaration from customer is needed where they will declare that they have not other financing relating to this transaction and they also undertake that the underlying transactions are genuine and undertake to furnish the for inspection. They also state that the all relevant documents they have produced upon the request of Bank.
  • In the application the customer will clearly state the following matter:
    • Remittance and loan amount
    • Name of supplier/beneficiary
    • Bank’s particulars and account number
    • Financing tenor and currency
    • Charges information
  • Bill of exchange accepted by the buyer
  • Copy of invoice and transport document

Documents Needed for LATR

  • Application from the Customer
  • Viability report along with business proposal
  • Photograph of signatory to be attested by the Chairman/Managing Director of the company
  • Copy of valid Trade License
  • Official seal with designation
  • Tax Certificate
  • KYC Form
  • Transaction profile etc.
  • Memorandum & Article of Association (MOA) with certificate of incorporation duly certified by RJSC (Registrar of Joint Stock Companies).
  • Certified Copy of up to date list of directors


This facility usually provided to importer to retire LC related shipping documents. Advance may be taken against LTR when the documents covering an import shipment are given without payments. Until the LTR is fully paid off, the goods or their sale proceeds in trust for the Bank. Letters of Trust receipt is kept as a primary security which creates the Banker’s lien on the goods. LTR facility is adjusted from the sale proceeds of imported goods or Cash from own sources of the customer within time period, or within the extended time of the Bank.