letters of credit are moderated by a bank in the form of a contract where the foreign buyer pays to their bank and the bank holds the amount unless the terms and conditions mentioned in the contract of sales are met.
LETTER OF CREDIT -wordpress
Exporting is always associated with several risks among which non-payment of foreign buyer is the most common one. To mitigate these payment risks, letters of credit are moderated by a bank in the form of a contract where the foreign buyer pays to their bank and the bank holds the amount unless the terms and conditions mentioned in the contract of sales are met. Letters of credit have always been the standard for handling risks though there are several other payment methods which are now in use for dealing with foreign transactions.Read on to know the advantages and disadvantages of letters of credit.
