Letters of Credit

October 16, 2014

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What is a letter of credit? - A letter of credit (LC) is a document issued by a bank or other financial institution on behalf of one of its clients, called the "applicant." The letter is effectively a guarantee of payment to another party-a vendor, for example-called the "beneficiary." The beneficiary is named in the LC. For example, your company might need to issue an LC to an overseas vendor to cover the cost of goods you expect to purchase. In this case, your bank or lending institution…

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