A letter of credit, or simply a credit letter, is a trading instrument issued by banks to confirm the trade payment terms between buyer and seller. The letter of credit of LC is required when buyers and sellers operate in different statuary or place large orders that require payment confirmation. Usually, a letter of credit […]
Revolving Letter Of Credit: How Does it Work? Read More »
It is the form of documentary credit where the first party uses a letter of credit to secure another Letter of Credit facility. It uses two letters of credit for one financial transaction. The sellers use this option to secure a credit facility by pledging the credit received from the buyer’s bank. It may work
Back to Back Letter of Credit: How does it work? Definition, Advantages, And More Read More »
Letters of credit facilitate international trades between unknown parties. An LC reduces the trust deficit between the seller and buyer. However, the clearance of funds with documentary credit often takes a long time. The sellers use the discounting of LC in their favor to receive short-term financing. What is the discounting of a Letter of
Letter of Credit Discounting: How Does It Work? Advantages, Advantages, and Limitation Read More »
A standby Letter of Credit (SBLC) works as an additional guarantee or cover in a trade agreement. It is a form of documentary credit where the bank becomes a guarantor to the seller for the payment. It differs from a standard letter of credit in the sense that it is used only in case of
Standby Letter of Credit – SBLC: How Does It Work? Features And Advantages Read More »
A transferable letter of credit provides the option of transferring the credit to a second beneficiary. The first beneficiary of a letter of credit is the seller (exporter). A transferrable LC allows the transfer of approved credit partially or in full to another party. A transferrable documentary credit is used often in agreements where the
Transferrable Letter of Credit: How Does It Work? Criteria, Features, Pros, and Cons Read More »
A deferred payment, usance, or time letter of credit is a time-bound form of a letter of credit. It works similarly to other LCs apart that it can releases funds after a specified time. It offers another flexible payment option for international buyers and sellers. Deferred Payment Letter of Credit – Working Mechanism The applicant
Deferred Payment Letter of Credit: How Does It Work? Read More »
Introduction A letter of credit is the instrument in which a bank guarantees the payment to the alternative party in case of default by the account holder to the issuing bank. In other words, it provides a guarantee to the other bank involved in the transaction as well as its client that it assures the
Letter of Credit Vs. A Standby Letter of Credit (SBLC): What Are the Main Different? Read More »
Introduction A standby letter of credit is the guarantee provided by the issuer bank or financial institution that the responsibility of payment will be transferred upon the non-payment of the party to the contract. In this type of instrument, the issuing bank will have to follow all the banking protocols followed by the bank. However,
A standby letter of credit (SBLC) vs Bank guarantee (BG): Detail Explanation Read More »
Definition: A confirmed letter of credit is an instrument that facilitates the international transactions between the willing buyer and willing seller, who live in geographically distanced places and in almost all cases in two different countries of the globe. Both the parties to the transactions are in fear that they will not be able to
What is a Confirmed Letter of Credit? Purpose, Types, Explanation, and More Read More »
Introduction In international trading, there is a lack of personal contact, distance, and separate law in each country, etc. To make foreign trading secure, a letter of credit is a well-structured way of payment mechanism. There are 3 parties involved in the letter of credit (LC) process; An importer that request the bank for the
What is a Revocable Letter of Credit? Definition, Example, Types, And More Read More »
