Types of Letters of Credit (LC) Various types of Letters of Credit (LC) prevail in trade transactions. In this post, we are classifying them by their purpose. Commercial, Export / Import, Transferable and Non-Transferable, Revocable and Irrevocable, Standby, Confirmed, and Unconfirmed, Revolving, Back-to-Back, Red Clause, Green Clause, Sight, Deferred Payment, and Direct Pay LC. A Letter of Credit is an essential financial tool in trade transactions. In domestic and international markets, trades use the LC to facilitate payments and transactions. A bank or a financial institution acts as a third party between the buyer and the seller and assures the cost of funds on completing certain obligations. Definition of Letter of Credit An LC is a financial document provided by a third party (with no direct interest in the transaction), mainly a bank or a financial institution, that guarantees the payment of funds for goods and services to the seller once the seller submits the r...
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