What is a letter of credit?
A written undertaking by the bank issued at the request of an applicant (importer) to pay a fixed sum of money on a specific date to a specific party (beneficiary/exporter) subject to the receipt of specified commercial and/or financial documents listed in the Letter Of Credit. The bank issues Irrevocable Letters of Credit, the terms of which cannot be amended after issuance until the beneficiary, the applicant and the bank agree to the changes. HBZ issues LCs in accordance with Uniform Customs and Practices for Documentary Credit Publication No. 500 of the International Chamber of Commerce.
A Letter of Credit is an instrument issued by a bank at the request of its customer (the buyer) that assures payment to the beneficiary (the seller) provided that the seller meets the terms and conditions as stated in the letter of credit. A letter of credit usually requires specified documents relating to the shipment of goods or providing of services.
Buyers are required to submit a letter of credit upon check-in at the sale. A letter of credit is a note from the Buyer’s bank that states the Buyer has $5,000. The purpose is to give Sellers reassurance that Buyers have said money. The letter must be dated within the previous ten days, must be signed by a representative of the Buyer’s bank, and must state that the Buyer has a minimum of $5,000.
A Letter of Credit (L/C) is a document issued by a bank on behalf of the buyer to a seller in which the bank substitutes its own credit for that of the buyer. The bank assures payment to the seller upon fulfillment of the documentary conditions specified. A Letter of Credit is an internationally recognized instrument.
A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank is required to cover the full or remaining amount of the purchase. A letter of credit is often abbreviated as LOC or LC, and is also referred to as a documentary credit. The parties to a letter of credit are usually an applicant who wants to send money, a beneficiary who will receive the money, the issuing bank and the advising bank. Letters of credit are often used for international transactions to ensure that payment will be received. They have become an important aspect of international trade, due to differing laws in each country and the difficulty of knowing each party personally. The bank also acts on behalf of the buyer, or holder of the letter of credit, by ensuring that the supplier will not be paid until the bank receives confirmation that the goods have b
