Letters Of Credit Definition 5

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In short, a letter of credit is a guarantee from the issuing bank's to the seller

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that if compliant documents are presented by the seller to the buyer's bank,

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then the buyer's bank will pay the seller the amount due.

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The 'compliance' of the seller's documentation

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covers not only the goods or services supplied,

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but also the timescales involved, method for,

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format of and place at which the documents are presented.

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It is common for exporters to experience delays in obtaining payment against letters of credit

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because they have either failed to understand the terms within the letter of credit,

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failed to meet the terms, or both.