ENTREPRENEURSHIP

Detailed explanation-1: -What is a Letter of Credit? A Letter of Credit is a contractual commitment by the foreign buyer’s bank to pay once the exporter ships the goods and presents the required documentation to the exporter’s bank as proof. As a trade finance tool, Letters of Credit are designed to protect both exporters and importers.

Detailed explanation-2: -With cash-in-advance payment terms, an exporter can avoid credit risk because payment is received before the ownership of the goods is transferred. For international sales, wire transfers and credit cards are the most commonly used cash-in-advance options available to exporters.

Detailed explanation-3: -Irrevocable Letter of Credit It is a safer option for the seller or exporter as it assures that the amount mentioned in the LC will be paid if the submitted papers fulfill the terms and conditions of the agreement. Irrevocable LC further has 2 types-Confirmed and Unconfirmed LC.

Detailed explanation-4: -A Letter of Credit is a letter from a bank that guarantees that the payment due by the buyer to a seller will be made timely and for the given amount.