Full Form of LC

What is LC?

LC is defined as a financial document commonly utilised in international trade and commerce. It functions as an official commitment from a bank or other financial organisation on behalf of a buyer to pay a seller, a certain amount of money after a few requirements are satisfied. In a trade transaction, LC offers protection and security to both parties, particularly in situations when they may not have a formal business relationship and are in different countries....

Full Form of LC

LC stands for Letter of Credit. LC is defined as a financial document commonly utilised in international trade and commerce. It functions as an official commitment from a bank or other financial organisation on behalf of a buyer to pay a seller, a certain amount of money....

Elements of Letter of Credit (LC)

1. Beneficiary (Seller): The person to whom the Letter of Credit has been issued is the beneficiary....

Features of Letter of Credit (LC)

1. Payment Guarantee: An LC gives the seller a guarantee that they will be paid....

Types of Letter of Credit (LC)

1. Irrevocable Letter of Credit: An irrevocable LC offers the seller the highest level of security and cannot be changed or revoked without the approval of all parties....

How does Letter of Credit (LC) works?

Letter of Credit (LC) works in a following manner:...

Examples of Letter of Credit (LC)

1. Import of Electronics: A major items of cellphones from a US company is intended for import by an electronics shop in India. The retailer opens an irrevocable and verified Letter of Credit through their bank to guarantee payment to the manufacturer. The amount of smartphones, quality requirements, delivery conditions and documentation needed for payment are all detailed in the LC. The American manufacturer ships the devices, gets the required paperwork to their American bank and the LC is recognised, guaranteeing the company gets paid....

Importance of Letter of Credit (LC)

1. Risk Mitigation: LCs helps in reducing risks for buyers and sellers equally....

Advantages of Letter of Credit (LC)

1. Financing Access: LCs can be used by buyers and sellers to obtain financing. While sellers may utilise the LC as security to secure loans or credit lines, buyers can negotiate terms for delayed payments....

Disadvantages of Letter of Credit (LC)

1. Not Suitable for All Transactions: LCs might not be the best option in all situations, particularly if the buyer and seller have an established connection and level of confidence....