Letter of credit

How it is used

A core trade finance product, shortened to L/C or LC. The importer (applicant) asks its bank (issuing bank) to open the L/C; the advising bank passes it to the exporter (beneficiary), and a confirming bank may add its own promise. Documents are checked under the ICC's UCP 600 rules, and any discrepancy can delay payment.

Example sentences

1. The buyer has opened a letter of credit payable at sight in our favour.

2. Payment under the letter of credit was delayed because of a discrepancy in the invoice.

Common collocations

• open a letter of credit
• confirmed letter of credit
• L/C at sight
• documents under the L/C
• UCP 600

Related terms

• trade financeBanking products that help importers and exporters pay and get paid safely, and that finance goods while they are produced, shipped or sold.
• documentary collectionA trade payment method in which the exporter's bank sends the shipping documents to the importer's bank, which releases them only when the importer pays or accepts a bill of exchange.
• beneficiaryThe person or company that receives money from a payment, a letter of credit, an insurance policy or a will.
• correspondent bankA bank that provides services, such as making payments or handling trade documents, for another bank in a country or currency where that bank has no presence.
• letter of guaranteeA bank's written promise to pay a set amount to a third party if its customer fails to meet an obligation, such as finishing a contract or paying a supplier.

This word in other fields

The same English word can have a different meaning in another field:

• letter of credit · International Trade

More terms: Trade Finance

• bill of exchange