4 Letters of Credit Terms Every Exporter Must Know

4 Letters of Credit Terms Every Exporter Must Know

Getting paid is the hardest part of any export deal. A Letter of Credit (LC) protects you but only if you understand its terms.

Here are 4 you can't afford to confuse:
1. Irrevocable LC
An LC that cannot be changed or cancelled without agreement from all parties.
→ USE WHEN: You want maximum payment security with a new buyer.
→ RISK: A "revocable" LC gives you almost no protection always confirm which type you're signing.

2. Confirmed LC
A second bank (usually in the exporter's country) guarantees payment on top of the issuing bank.
→ USE WHEN: You're unsure about the buyer's bank or country risk.
→ RISK: Without confirmation, you rely entirely on a foreign bank you don't know.

3. Sight LC
Payment is made as soon as documents are presented and verified.
→ USE WHEN: You need fast cash flow after shipping.
→ RISK: Any document error can delay "immediate" payment for weeks.

4. Usance (Deferred) LC
Payment is made at a future date 30, 60, or 90 days after shipment.
→ USE WHEN: You're offering credit terms to win a competitive deal.
→ RISK: You ship now and wait months to get paid cash flow pressure is real.

The difference between a smooth deal and a costly one often comes down to one word in your LC.

Simply Export thru Sow Exim.