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A/R Finance & Factoring Terms GLossary

What isLetter of Credit (L/C)

A Letter of Credit (L/C) is payment arrangement used typically in International Trade. The issuing bank guarantees that an exporter will receive payment in full as long as certain delivery conditions have been met. In a Standby Letter of Credit, if the importer is unable to make a payment on the purchase, the bank will cover the outstanding amount. A Letter of Credit (L/C) is typically more expensive than Cash Against Documents funding but offers more safety and control.

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