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Letters of Credit

Key Benefits

To the Importer

  • Able to control terms and reduce risk
  • Can predict cash flow and price goods accurately
  • Can negotiate for better terms
  • Can obtain extended credit by having tenor LCs

To the Exporter

  • Payment assured without affecting own bank limits
  • Enhanced competitiveness
  • Predicted cash flow
  • Exporter may save costs of other credit insurance
  • Access to local help and advice
  • Country risk eliminated by an accepting bank in exporter's country
Important Features
  • LC issued by importer's bank
  • Credit terms and currency of payment may be negotiated
  • Credit may be confirmed by a bank in the exporter's country
  • Known payment date and revenue
  • LC can provide for payment at sight or tenor (deferred payment, say 30, 60, 90 or more)
  • Customer instructs own bank to issue LC and also to specify terms
  • Credit terms, price and currency of payment may be negotiable