noun a document issued by a bank or financial institution guaranteeing payment to a seller on behalf of a buyer
In finance, a letter of credit is a document issued by a bank guaranteeing payment to a seller on behalf of a buyer. It is commonly used in international trade to reduce the risk of non-payment.
Businesses frequently use letters of credit to facilitate transactions and establish trust between parties involved in trade or other business dealings.
In legal contexts, letters of credit are often used as a form of financial security or guarantee in contracts and agreements.
Banks play a key role in issuing and managing letters of credit, which are seen as a reliable form of payment in various financial transactions.
Letters of credit are crucial in international trade as they provide security to both buyers and sellers by ensuring that payment will be made once the terms of the agreement are met.
A writer may use a letter of credit when entering into a contract with a publisher or literary agent to ensure payment for their work.
A psychologist may use a letter of credit when conducting research studies that require funding from a grant or other source.
Importers and exporters commonly use letters of credit to guarantee payment for goods being shipped internationally.
Bankers play a key role in facilitating letters of credit transactions between buyers and sellers, ensuring that payment is made according to the terms of the agreement.
Professionals in this field may advise clients on the use of letters of credit to mitigate risks in international trade transactions.