1. Standby LC
This LC is closer to a bank guarantee and is only used if the buyer fails to fulfil payment obligations. Provides extra assurance to the seller.
Letter of Credit
Trade Finance Services
Letter of Credit
In today’s fast-paced world, international trade is the backbone of global finance. However, when it comes to building trust between parties often unfamiliar with each other. Trust is incredibly important when agreeing on payment terms. One of the most trusted instruments in mitigating trade risk is the letter of credit.
A letter of credit is bank-issued financial guarantee, which is relevant where there is an importer or an exporter. A letter of credit plays a significant role in safeguarding both importers and exporters in cross-border transactions
Structured around your goals
In today’s fast-paced world, international trade is the backbone of global finance. However, when it comes to building trust between parties often unfamiliar with each other. Trust is incredibly important when agreeing on payment terms. One of the most trusted instruments in mitigating trade risk is the letter of credit.
- Why Letters of Credit Matter
- What is a Letter of Credit?
- How Does a Letter of Credit Work?
- Advantages
01
Why Letters of Credit Matter
A letter of credit is crucial as trust is vital in trade. While some transactions operate and open account terms, an LC is often a more secure structure. There are many types of LCs, and most of them today. People often get confused between commercial letters of credit and standby letters of credit.
Depending on the perspective of the buyer or seller, there are also:
Import letters of credit , which are set up by the importer or the buyer of goods or services
Export letters of credit , which are set up by the importer or exporter
- Letter Of Credit
- Standby Letter Of Credit
- Bank Guarantee
- Performance Guarantee
- Proof of Funds
- Documentary Collection
02
What is a Letter of Credit?
A letter of credit is crucial as trust is vital in trade. While some transactions operate and open account terms, an LC is often a more secure structure. There are many types of LCs, and most of them today. People often get confused between commercial letters of credit and standby letters of credit. Depending on the perspective of the buyer or seller, there are also import letters of credit, which are set up by the importer or the buyer of goods or services, and export letters of credit, which are set up by the importer or exporter.
03
How Does a Letter of Credit Work?
- The buyer requests the bank to issue an LC in favour of the seller
- The bank, often in the seller’s country, communicates the LC
- The seller ships the goods and submits the documents according to the LC terms and conditions.
- Upon the verification of documents, payment is released
04
Advantages
- Clarity: All terms and goods in the LC are very specific and clearly defined
- Security: Payment is only made when all terms are fulfilled, so there is security for the buyer
- Efficiency: Letters of credit can be raised electronically through an online trade portal
- Enable global reach: Letters of credit allow companies to trade safely in unfamiliar markets.
05
Different Types of Letters of Credit
2. Confirmed LC
In addition to the bank guarantee of LC Ishwar, this LC type is confirmed by the seller’s Bank or any other bank. Adding its guarantee on top of the issuing bank’s commitment.
3. Unconfirmed LC
Only the issuing bank is responsible for the payment. No added security from the second bank.
4. Back-to-Back LC
This LC type considers issuing the second LC on the basis of the first letter of credit. It is often used by intermediaries who buy from third parties to fulfil the original contract.
5. Transferable LC
This LC enables the seller to assign part of the letter of credit to another party. It is useful in multi-supplier or intermediate transactions.
6. Payment at Sight LC
According to this LC, payment is made immediately upon submission, typically within seven days.
06
7. Red Clause LC
The seller can request an advance for an agreed amount of the LC before shipment of goods and required documents. This red clause is so termed because it is usually printed in red on the document to draw attention to the advance payment term of credit.
Why Choose OIB
Built for secure international finance
Each engagement is handled with a focus on clarity, risk awareness, documentation quality, and dependable delivery.
Why Letters of Credit Matter
A letter of credit is crucial as trust is vital in trade. While some transactions operate and open account terms, an LC is often a more secure structure. There are many...
What is a Letter of Credit?
A letter of credit is crucial as trust is vital in trade. While some transactions operate and open account terms, an LC is often a more secure structure. There are many...
How Does a Letter of Credit Work?
The buyer requests the bank to issue an LC in favour of the seller
1. Standby LC
This LC is closer to a bank guarantee and is only used if the buyer fails to fulfil payment obligations. Provides extra assurance to the seller.
Key Features
Letter of Credit capabilities
Core support areas are summarised below for quick scanning before you review the full service details.
- Why Letters of Credit Matter
- What is a Letter of Credit?
- How Does a Letter of Credit Work?
- Advantages
- Clarity: All terms and goods in the LC are very specific and clearly defined
- Security: Payment is only made when all terms are fulfilled, so there is security for the buyer
FAQs
Frequently asked questions
What should I know about Why Letters of Credit Matter?
A letter of credit is crucial as trust is vital in trade. While some transactions operate and open account terms, an LC is often a more secure structure. There are many types of LCs, and most of them today....
What should I know about What is a Letter of Credit??
A letter of credit is crucial as trust is vital in trade. While some transactions operate and open account terms, an LC is often a more secure structure. There are many types of LCs, and most of them today....
Who can use Letter of Credit?
This service is designed for businesses, entrepreneurs, institutions, and international clients who need secure banking support.
How do I start a discussion?
Use the contact page to share your requirements, timeline, transaction background, and any supporting documents with the OIB team.
Discuss Letter of Credit with OIBL
Connect with Oxford International Bank to align this service with your business requirements, trade activity, and international financial goals.
