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Old 09-05-2012, 10:27 AM
richardshelton richardshelton is offline
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A Letter of Credit is a document that guarantees payment from the importer's bank to the exporter's bank. In this way it is similar to a home loan where the bank guarantees payment from the buyer to the seller, although the importer usually already has the funds to purchase the goods, but needs the bank's guarantee to reassure the exporter of payment. A typical Letter of Credit will state that when a specific condition has been met, (usually the exporter providing proof of shipment) the importer's bank will release the payment to the exporter's bank.
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