Letter of Credit

What is a Letter of Credit?

A letter of credit, also known as a documentary credit, is a payment system that protects the exporter and the importer in a contract of sales. In short, the letter of credit is used to prove the importer’s credit worthiness and guarantees payment of goods upon receipt. Generally, the exporter requests the letter of credits.

This is the letter sent from one bank to another, especially to another country, as a guarantee for the payment of shipment.