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Letter of Credit

Letter of Credit

Letter of Credit

Letter of Credit (LC) creates security and enhances trust for your seller, the bank will assume responsibility for the payment by issuing a letter of credit as a guarantee to the seller and ensure the terms and documents are checked and received for goods clearance. It is helpful for business owners who often deal with international trading.


A letter of credit is a document issued by a bank that guarantees payment to a seller on behalf of a buyer. It is commonly used in international trade to facilitate transactions between buyers and sellers who may not know each other.

The buyer and seller agree on the terms of the transaction and the buyer applies for a letter of credit from their bank. The bank issues the letter of credit to the seller, guaranteeing payment for the goods or services provided. The seller then ships the goods or provides the services, and presents the necessary documents to the bank to receive payment.

There are several types of letters of credit, including commercial letters of credit, standby letters of credit, and revolving letters of credit.

A letter of credit provides security for both the buyer and seller in a transaction. The buyer is assured that the goods or services will be delivered as specified, while the seller is assured of payment once the necessary documents are presented.

The documents required for a letter of credit can vary depending on the type of transaction, but typically include a commercial invoice, bill of lading, and insurance certificate.

The buyer is responsible for paying the bank’s fees associated with issuing the letter of credit.

The processing time for a letter of credit can vary depending on the complexity of the transaction, but typically takes a few days to a few weeks.

If the documents presented do not meet the requirements specified in the letter of credit, the bank may refuse payment until the discrepancy is resolved.

A letter of credit can be cancelled by the buyer, the seller, or the issuing bank, but cancellation may result in fees or penalties. Contact us for customized solutions specifically tailored to your needs today.

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