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Importance of Letter of Credit

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Pacific Corp
Importance of Letter of Credit

Letter of Credit :

Letter of Credit and their services plays a major role, in order to make efficient payment security measures to mitigate risk and facilitate smooth transactions.


Benefits of Letter of Credit :

In order to reduce the risk of non-payment from the seller’s side, a letter of credit is most commonly used in international trade. The letter of credit has been issued by a bank and acts as a guarantee to the seller that the buyer's payment will be received as long as the terms and conditions specified in the letter of credit are met. This provides security for the seller as the payment is guaranteed by the bank. This builds trust between the buyer and seller, particularly in situations where they are located in different countries.


Where Can We Receive Letter Of Credit :

A letter of credit services can be obtained from a financial institution such as a bank. The buyer basically requests the letter of credit from their bank, which then issues the letter of credit to the seller upon the applicant's payment of the necessary fees and meeting of other requirements. The issuing bank's obligation to pay the seller is contingent upon the seller presenting documents that meet the terms and conditions specified in the letter of credit. The seller can then present these documents to the issuing bank or an advising bank for payment. In some cases, the seller may also choose to use a confirming bank, which can provide an additional layer of security for the seller by independently confirming the letter of credit


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