Use letter of credit as payment method

What is letter of credit and how can i pay for order by L/C ?

A Letter of Credit (LC) is a guarantee issued by a bank to pay a seller for goods or services. The buyer’s bank issues the LC to the seller, promising payment upon presentation of specified documents. The seller ships the goods and presents the documents to the bank, which examines them and releases payment if they comply with the LC’s terms. This method ensures secure transactions for both parties involved.

 

Buyer & Seller Agreement

Both the buyer and seller agree to use a letter of credit for their transaction.

Application

The buyer asks their bank to issue a letter of credit, with Highlighting all the details

Bank Issuance

The buyer's bank creates the letter of credit, promising to pay the seller when certain conditions are met.

Notify by Bank

The seller's bank gets notified about the letter of credit and verifies it.

After Goods Shipped

The seller ships the goods and prepares all the necessary documents listed in the letter of credit.

Submit Documents

The seller sends these documents to their bank, which forwards them to the buyer's bank.

Check Documents

The buyer's bank reviews the documents to ensure they match what's required in the letter of credit.

Payment Release

If everything checks out, the buyer's bank pays the seller, completing the deal.