A documentary letter of credit is a payment and security instrument. Documentary letter of credit is the most used banking product in international transactions in banking practice.
Advantages
- Certain realization of agreed project - The most commonly used international payment instrument and payment security instrument that provides you and your business partner with a high level of contract security as well as additional negotiation options regarding terms, payment deadlines, documents and prices.
- Payment and procurement of goods only with the fulfillment of certain conditions - A letter of credit guarantees to the buyer (importer) that payment will be made only in the event that the seller (exporter) presents the required documents. A letter of credit also gives the buyer the certainty that he will receive the goods he has contracted, while it guarantees the seller that he will charge for the delivered goods if he has fulfilled the conditions agreed in the letter of credit.
- The buyer does not have to own the funds until the moment of payment.
- The realized amount of the letter of credit is due for payment on the day of the payment executed according to the letter of credit.