Commercial letters of credit


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Related to Commercial letters of credit: Revocable letter of credit, Irrevocable Letters of Credit

Commercial letters of credit

Trade-related agreement that a certain amount of bank funds is available to an entity.

Letter of Credit

A statement issued by a bank to the buyer of a good stating that the seller will receive payment on time and in the correct amount. If the buyer fails to make payment, the bank will do so on his/her behalf. The buyer presents a letter of credit to the seller, which eliminates the risk that the seller will not be paid. Letters of credit have become very common in international commerce, as distance and other factors make it difficult for sellers to establish the creditworthiness of every buyer.
References in periodicals archive ?
Shipper's indemnities put the risk where it belongs while taking advantage of the fact commercial letters of credit are intended to be paid.
The standby letter of credit is a member of the family of independent undertakings that includes commercial letters of credit (also known as documentary letters of credit) and independent guarantees.
Credit and cash management personnel should be aware that rules concerning payments under commercial letters of credit are being drafted by a banking group with little or no input from corporate users.
The credit facility is comprised of credit lines of: (1) a $25 million borrowing base line of credit, which is available for standby letters of credit, commercial letters of credit and loans; (2) a bridge line of credit in the amount of $7 million, which is to support equipment purchases; and (3) a foreign exchange line in the amount of $10 million.
The Revolving Credit is currently undrawn and includes a subfacility of $75 million for standby and commercial letters of credit.
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