Documentary Credits

Documentary credits, often referred to as letters of credit, are financial instruments used in international trade to ensure payment and reduce risk. When a buyer wants to purchase goods from a seller in another country, the buyer’s bank can issue a documentary credit. This guarantees that the seller will receive payment once they provide proof, such as shipping documents, that they have fulfilled the terms of the sale. This process protects both parties: the seller knows they will be paid, and the buyer ensures that payment only happens when the agreed conditions are met.