Letter of Credit

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 […]

It is a type of Letter of Credit that includes a special clause of facilitating the seller with advance payment. Historically, the special clause remained part of the full trade agreement, and the clause used to be inked in red, hence the name. The sellers or exporters require cash to procure raw materials and inventory.

In order to understand the green clause letter of credit one has to understand first the red clause letter of credit. A Red Clause LC will have the following information written in it. The letter will contain a clause typed in red which authorizes making advance payment to the beneficiary. It states the amount that

Introduction Million-dollar international trading is performed every day between different countries all around the globe. The security of the payment process and the monetary transaction is the main concern in any foreign and domestic deals. Many payment mechanisms have been introduced by economists and accountants but the letter of credit process is gaining popularity in

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

A Letter of Credit (LC) is a financial document that financial institutions provide as a guarantee for their clients. These clients are businesses that want to purchases goods, usually from foreign businesses. However, it can also facilitate domestic transactions. Usually, foreign transactions for physical goods require LCs or else these transactions cannot take place. In

Introduction The financial relationship between buyer and seller is developed on the foundation of trust. To build a long term business interconnection payment guarantee is essential.  To make sure the payment transaction smoothly works between parties’ letter of financial credit plays an integral role. Definition In international trading, the banks provide a guaranteeing letter that

By definition, it’s a third-party guarantee on behalf of its client to another party for payment of a contract. Banks and large financial institutes issue letters of guarantee on behalf of their business clients to their suppliers to ensure the contract payment will be made if their customer fails to make the obligation. In other

Financial institutions provide many types of facilities to businesses. Among these facilities are the letter of credit and line of credit. While the names may sound similar, they are different facilities. Both of them have different structures. Similarly, businesses use them for different purposes. They also span over different lengths of time. Businesses must know

Introduction Modern-day trade involves global integration as a result of digitalization, and globalization. With global trade reaching new heights with every passing day, associated transactions are also likely to increase. With considerable transactions, there is also an added responsibility to ensure that organizations can take care of their payment cycles to maintain a seamless relationship