LETTER OF CREDITS

Letters of Credits (LC)/Documentary Credits are written undertaking issued by a UTB, on behalf of a buyer, to the seller, to pay for goods or services. The seller must present documents which comply with the terms and conditions of the credit to the bank.

Features

  • LC can either be Import or Export LC
  • LC guarantees payment from buyer to seller.
  • It can be irrevocable or revocable.
  • It is an insurance contract for both parties involved to eliminate credit risk
  • It also clears up payment delays.
  • It assures expert examination of documents
  • Title documents are controlled by the bank
  • LC is expensive

Benefits

  • Offer degree of safety when importer or exporter are in untested business relationship
  • Quick and more secure means of payment for seller
  • Customers have access to foreign currency at very competitive rates
  • The customer/buyer lowers the risk of paying for substandard goods
  • Facilitating Financing

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