A letter of credit (LC) is a document issued by a bank used for international business transaction. It is mainly used by exporters and importers. The bank issuing the LC promises to pay on behalf of the customer. Before issuing the LC the buyer has to deposit the money in the bank. The seller should fulfill all the requirements that both the buyer and the seller have agreed to, before he receives the money. It is a convenient way to carry out international business as the bank stands as the guarantor. Both parties involved in the business are satisfied as the buyer gets his goods on time and the seller receives a prompt payment.
Thanks for the information and I want to know that if the buyer have to pay all money in advance or bank takes the responsibility?
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Take Care
The money is paid by the buyer himself, not to the seller but to the bank issuing the LC. The bank becomes the beneficiary of the buyer once they have issued a LC letter and makes payment to the seller on his behalf.
Hi Aneekalam,
A letter of credit (LC) is a document issued by a bank used for international business transaction. It is mainly used by exporters and importers. The bank issuing the LC promises to pay on behalf of the customer. Before issuing the LC the buyer has to deposit the money in the bank. The seller should fulfill all the requirements that both the buyer and the seller have agreed to, before he receives the money. It is a convenient way to carry out international business as the bank stands as the guarantor. Both parties involved in the business are satisfied as the buyer gets his goods on time and the seller receives a prompt payment.
Hi Racheal,
Thanks for the information and I want to know that if the buyer have to pay all money in advance or bank takes the responsibility?
_________________
Take Care
Hi Aneekalam,
The money is paid by the buyer himself, not to the seller but to the bank issuing the LC. The bank becomes the beneficiary of the buyer once they have issued a LC letter and makes payment to the seller on his behalf.
Hi Racheal,
Thank You again
difference between Bank guarantee and LC
What is the baisc difference between Bank guarantee and LC as in both the cases applicant's bank stands as guarntor on behalf of its client to pay?
OBOUT THE LC
THIS FACILITY IS AVALIBLE IN INDIAN BANKS
Lc
Letters of credit can be used for purposes other than making settlement in international trade.what are these other purposes?
Waiting please
Waiting please
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6BFgKH Really appreciate you sharing this blog.Much thanks again. Keep writing.
LC
What is purpose of LC