Documentary Letter of Credit

A Documentary Letter of Credit (DLC) is a financial tool used in international trade to ensure payment for goods. It is issued by a bank on behalf of a buyer, promising to pay a seller once certain documents are presented, proving the goods were shipped as agreed. This arrangement provides security for both parties: the seller is assured they will receive payment, while the buyer knows that funds will only be released if the seller meets specific conditions. Essentially, it acts as a guarantee, facilitating trust in transactions between businesses in different countries.