Letter of Credit (L/C)

Tags: Glossary

A document issued by a bank guaranteeing payment to the seller upon completion of certain conditions specified.

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What is a Letter of Credit (L/C)?

A Letter of Credit (L/C) is a financial instrument used in international trade to provide assurance to the seller that the buyer has sufficient funds to complete the transaction. The L/C is issued by a bank on behalf of the buyer and guarantees that the seller will be paid once the shipment has been completed according to the terms of the agreement. The L/C also provides protection for the buyer by ensuring that the seller meets all agreed-upon requirements before payment is made. 

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