Export Letter of Credit

An Export Letter of Credit is a commercial letter of credit issued by a foreign bank in favour of a domestic exporter at the request of a foreign buyer.

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

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