A Letter of Credit (LC) provides protection for both the buyer and the seller in international trade. The bank undertakes to pay the seller only upon presentation of documents proving that the contractual terms have been fulfilled. This ensures that the buyer makes payment only after goods or services have been duly delivered.
Types
Issued through a single contract or within a credit limit for letters of credit and/or bank guarantees
Term and Validity
According to the conditions of the trade agreement
Collateral
Cash funds, mortgage, special pledge of machinery and equipment, assignment of receivables, pledge of a commercial enterprise, etc.