Letter of Credit Guide - Features, Importance & When To Use It

Being a global trader, you may have come across the term “Letter of credit” but you wonder what it is, how it works, and why do global traders need it? This Letter of credit guide can help you get your answers.

• What Is A Letter Of Credit?
• What Is The Need For Applying For A Payment Guarantee Letter?
• Features of Letters of Credit
• Importance of Letters of Credit
• Parties Involved In The Issuance of LC
• Types of Letter of credit
• How Does a Letter of Credit Work?
• Documents Required For LC
• Is There Any Difference Between a Loan and a Letter Of Credit?
• What Is The Difference Between A Bank Guarantee And A Letter Of Credit?
• When To Use A Letter Of Credit?
• Advantages of Letter of Credit in Global Trade Deal

Other Advantages of Letter of Credit

1. Letter of credit services allows parties-to-the-contract to trade with unfamiliar overseas parties and establish new trade opportunities.

2. Both importers and exporters can expand their business quickly in new geographical areas.

3. A letter of credit is a safe, customizable, and flexible type of import trade finance.

4. Both the importers and exporters can put their conditions in the LC agreement as per their convenience and requirements.

Trade finance instruments like an LC can significantly help you reduce foreign trade payment risks and allow you to enter into an international trade deal without any threat of payment failure. 

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