Letter of Credit

A Letter of Credit is a financial document issued by a bank that assures a seller they will receive payment for goods or services provided, as long as certain conditions are met. It acts as a guarantee for the seller, reducing the risk of non-payment. When the buyer requests this document, the bank promises to pay the seller when the seller presents the required documents (like shipping receipts) confirming the successful delivery of goods. This way, it fosters trust in international trade by protecting both the buyer and the seller.