letter of credit


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credit, letter of,

commercial instrument through which a bank or other financial institution instructs a correspondent institution to advance a specified sum of money to the bearer. The document is called a circular letter of credit when it is not addressed to any particular correspondent. In effect, a letter of credit is a draftdraft,
in banking, order by one party to another party to pay a stated sum to the person or firm in whose favor the draft is made. It is similar in form to the ordinary bank check. Often the drawer and the drawee of a draft are the same person.
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, save that the amount is merely stated as a maximum not to be exceeded. Letters of credit, mainly used by travelers, greatly simplify nonlocal business transactions. Those who issue such letters are usually so well known that any bank will honor the letter upon proper identification. Travelers' checks are a modified form of a letter of credit. They are issued in coupons, upon whose face a value is usually expressed in terms of the currency of a particular country. In the United States they are issued by express companies and banks. Circular letters of credit require that each payment, as it is made, be endorsed by the firm making payment so that other banks may know how much of the total credit has been used.

letter of credit:

see credit, letter ofcredit, letter of,
commercial instrument through which a bank or other financial institution instructs a correspondent institution to advance a specified sum of money to the bearer.
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References in periodicals archive ?
Late presentation: Documents presented later than 21 days after shipment or after the number of days stipulated in the letter of credit.
It explained in its claim that it delivered goods valued at E70,000 and submitted the letter of credit to the bank to review it and ensure its conformity with the conditions for such credit payments.
First Community's attorney, Stuart Hankins of Sherwood, argued in his filings that the letter of credit wasn't straightforward or ordinary.
Should the council resolution be approved, it would authorize Bautista to sign the MOA with Petron Corporation and to secure a P40-million letter of credit from the LBP "as payment security for the supply of gasoline and other related products and services" through the electronic fleet card scheme
When the UCC was obligated, using letter of credit as a means of payment in commercial transactions was a reasonable assumption.
minerals for farming, has signed a USD1,000,000 Letter of Credit Agreement.
This facility is the renewal of the previous letter of credit facility of CAD3.75bn which was scheduled to mature in 2013.
The Prime-1 rating on the CP notes is based primarily on an irrevocable, direct-pay letter of credit provided by Bank of America, (Aa3/Prime-1/C-), which fully supports the program.
Where the UK company is an exporter, the letter of credit may simply be a means of payment risk mitigation, which is particularly important given the widespread recent reductions in cover provided by the credit insurance market.
A letter of credit is a legal document that a business can purchase from a bank.
Before you run to the bank to seek a line of credit to start importing, you can save some time and energy by having a clear understanding of a letter of credit and a line of credit.
We used a letter of credit with our first major order from Japan.