What is a Letter of Credit?
A Letter of Credit (LC) is a payment guarantee issued by the buyer's bank to the seller's bank, promising to pay the seller upon presentation of compliant shipping documents. It's the safest payment method in international trade — protecting both exporters and importers.
Types of Letters of Credit
- Sight LC — Payment made immediately upon document presentation.
- Usance LC (Deferred Payment) — Payment after a fixed period (30, 60, 90, 180 days).
- Standby LC (SBLC) — Acts as a guarantee; payment only if buyer defaults.
- Revolving LC — Automatically renews for repeat shipments.
- Confirmed LC — A second bank guarantees payment (reduces country risk).
- Transferable LC — Can be transferred to a third-party supplier.
LC Document Requirements
Banks scrutinize documents under strict UCP 600 rules. Any discrepancy — even a typo — can delay payment. Key documents:
- Commercial Invoice matching LC terms exactly
- Packing List with weights and measurements
- Bill of Lading (clean, on-board, showing notify party)
- Certificate of Origin
- Insurance Certificate (if CIF terms)
How Eximly Prevents LC Discrepancies
Eximly's AI Document Validator cross-checks your invoices, packing lists, and B/L against LC terms before you submit to the bank. It catches mismatches in amounts, weights, port names, and dates — preventing costly discrepancies that delay payment by weeks.
Related topics
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