Hi Mikey Whimpreck,
A letter of credit or (LC) or export documentary letter of credit is a feature that can help provide a level of security when transacting with an overseas business.
Importers are normally required to pay in advance for goods shipped by an exporter. This can be very risky since there's no guarantee that they will receive them. Similarly, if credit were to be extended by the exporter, there's no guarantee that they will be paid later.
So if you're an importer, you can instruct your bank to provide the exporter with a letter of credit that guarantees payment once you or your bank receives documents confirming that the goods have been shipped, which can include a bill of lading (BoL), commercial invoice, Certificate of Origin or an inspection certificate.
Until the exporter is paid or provided a bill of exchange to pay at a future date, the bank retains control over the goods.
If you want to learn more, you can go through our website. We can also be reached on 1300 889 743
or you can even enquire online