What is a Letter of Credit?
A letter of credit is a letter from a bank that provides important guarantees. It can help businesses to trade internationally, whether you’re the business who’s importing or exporting the goods.
For businesses exporting, the risk is that you will send goods but never receive payment from the customer. A letter of credit provides you with a bank guarantee that you will be paid in the event your customer is unable to settle the debt.
Importers, meanwhile, may fear that they will send payment for goods they never receive. A letter of credit means they benefit from knowing they will receive the goods ordered before having to pay.