Letter of Credit :-

A Letter of Credit (LC) is a financial product issued by the importer's bank on behalf of the importer. The importer, known as the applicant, requests the LC, while the exporter is the beneficiary. The issuance of an LC provides assurance to the exporter that the issuing bank will guarantee payment for the goods or services provided in the international trade transaction. The bank commits to paying the specified amount within the agreed timeline, provided that the required documents meet the terms and conditions outlined in the LC.

In an LC arrangement, the issuing bank acts either on the importer's instructions or on its own behalf to make payment directly to the beneficiary (the exporter). The issuing bank may also accept bills of exchange or drafts drawn by the exporter. Additionally, the bank can authorise advising or nominated banks to make payments or accept bills of exchange, ensuring that the exporter receives the guaranteed payment as stipulated in the LC. This service is one of the key financial solutions that Finnova Advisory provides, making us a trusted financial company for international trade.

Key Features of a Letter of Credit (LC):
 

• Payment Security:
  Provides a secure method of payment for international trade by ensuring the seller receives payment once conditions are met.

• Bank Guarantee:
  Involves a bank's commitment to pay the seller on behalf of the buyer, adding a layer of financial security.

• Documentary Requirement:
  Payment is contingent upon the seller presenting specific documents (like a bill of lading, invoice, etc.) that prove the terms of the LC have been fulfilled.

• Irrevocability:
  Most LCs are irrevocable, meaning they cannot be altered or cancelled without the agreement of all parties involved.

• Expiry Date:
  Specifies a clear timeframe within which the required documents must be presented for payment to be made.