WebJan 8, 2024 · What is a Letter of Credit? A Letter of Credit (LC) can be thought of as a guarantee that is backstopped by the Financial Institution that issues it. One party is required to guarantee something to another party; typically, it’s payment, but not always – it could also be guaranteeing that some project will be completed. WebIn the letter of credit, in place of the buyer’s undertaking to pay, a separate undertaking of the bank as a neutral entity is introduced, which thus makes the supplier independed of the will to pay or solvency of the buyer L/C protects: the supplier from the risk of refusal to pay against the documents relating to a given delivery
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