letter of credit Definition

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letter of credit

Definition

L/C. A binding document that a buyer can request from his bank in order to guarantee that the payment for goods will be tranferred to the seller. Basically, a letter of credit gives the seller reassurance that he will receive the payment for the goods. In order for the payment to occur, the seller has to present the bank with the necessary shipping documents confirming the delivery of goods within a given time frame. It is often used in international trade to eliminate risks such as unfamiliarity with the foreign country, customs, or political instability.

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'letter of credit' appears in the definitions of these other terms on BusinessDictionary.com

letter of credit (L/C), cash cover, advised credit, advising bank, favouree, and

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