How is a letter of credit transaction conducted?

A Letter of Credit is a document in which a bank guarantees payment.

In simple terms, it’s a promise from the bank saying, "We’ll pay you as long as the conditions are met" on behalf of the buyer.

Advantages

- There is almost no credit risk for the buyer (the bank guarantees it)

- Payment collection is assured as long as the documents are correct

- Safe for transactions with new buyers and in high-risk countries

Disadvantages

- Fees are high (1-2% of the transaction amount)

- Document requirements can be strict (payment refusal in case of discrepancies)

- The process is complex and time-consuming

There are various types of L/C. Choose the one that fits your situation.

Let's explore how L/C transactions proceed in 10 steps.

L/C is safe, but it comes with costs. Reflect this in your estimate to set the price.

Once you receive the L/C, review all conditions within 72 hours. If there are any issues, you must immediately request an Amendment.

These are the most common discrepancies that occur in L/C transactions. Knowing them in advance can help you prevent issues.

Here are some practical tips for successfully conducting L/C transactions.