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 shipment 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.

Use letter of credit in a sentence

When I purchased goods from another country the seller requested a letter of credit to give him reassurance that he would be paid.

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You may want to get a letter of credit to show that you really can get a hold of what you claim you can.

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I got a letter of credit which was sort of like a guarantee, just making sure that everything went smoothly.

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irrevocable letter of credit standby letter of credit