Export Letters of Credit
An Export Letter of Credit is a commercial letter of credit where the importer’s bank irrevocably commits to payment provided that the exporter complies with the terms and specifications of the letter of credit.
The purpose of an export letter of credit is two-fold: first, the export letter of credit virtually eliminates any credit risk assumed by non-payment for the goods sold; and second, it ensures a line of credit to finance business with borrowed money.
Benefits of using an Export Letter of Credit
- Improvement in cash flow management
- Extended payment terms
- Hedges currency exposures
- Prevents insurance costs
- Reduces your payment risks
- Improves your operational efficiency
- Gives you greater control over your trade activities