Letters of Credit
Guarantee payment to suppliers and secure the release of goods.
Letters of Credit (LCs) are one of the oldest and most trusted instruments in international trade, providing a bank-backed guarantee of payment that gives both buyers and sellers the confidence to transact across borders. The issuing bank undertakes to pay the beneficiary upon presentation of compliant trade documents, eliminating the credit risk that would otherwise exist in open account trading.
Aberdeen Corporate Finance arranges letters of credit through our panel of trade finance banks and specialist providers, ensuring competitive issuance fees, fast turnaround, and expert documentary guidance to prevent discrepancies that could delay payment.
Types of Letters of Credit
Documentary Letters of Credit
The most common form of LC in international trade. The issuing bank guarantees payment to the beneficiary (supplier) upon presentation of compliant shipping and trade documents. This provides security for both buyer and seller — the supplier knows they will be paid, and the buyer knows goods have been shipped as agreed.
Confirmed Letters of Credit
A confirmed LC adds a second bank's guarantee (the confirming bank, typically in the seller's country) to the issuing bank's undertaking. This provides the supplier with the security of a local bank guarantee, eliminating country risk and issuing bank credit risk.
Standby Letters of Credit
A standby LC acts as a bank guarantee — it is only drawn upon if the buyer fails to perform under the underlying contract. Commonly used as a form of performance bond or payment guarantee in international and domestic transactions.
Revolving Letters of Credit
For businesses with regular, repeat shipments from the same supplier, a revolving LC reinstates automatically after each drawing. This reduces the administrative burden and banking costs of issuing multiple individual LCs.
Transferable Letters of Credit
A transferable LC allows the first beneficiary (typically a middleman or trader) to transfer all or part of the LC to a second beneficiary (the actual supplier). This is commonly used in back-to-back trading structures.
LC Discounting & Financing
Once an LC is issued, the beneficiary can discount it (receive early payment) before maturity. This provides the supplier with immediate cash flow while the buyer retains the agreed payment terms. We arrange LC financing at competitive rates.
Key Benefits
LC Criteria
To arrange a letter of credit, the buyer typically needs:
Important Notice: Letters of credit are subject to the Uniform Customs and Practice for Documentary Credits (UCP 600). Discrepant documents may result in delayed or refused payment. Aberdeen Corporate Finance Limited is not regulated by the FCA.
Need a Letter of Credit?
Contact us to arrange LCs quickly and competitively through our trade finance panel.
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