Commercial Letters of Credit

Reduce your risks when doing business internationally

How It Works

What you need to know about commercial letters of credit

Typical conditions

Conditions involving commercial letters of credit typically involve the presentation of documents showing shipment has been made (i.e., negotiable bills of lading), insurance documentation, invoices and inspection certificates.

Two forms of letter of credit payments

Sight payments demand immediate disbursement when the required documents are presented, examined and approved. Time payments delay payment until a future date following document approval and release.

Specific details about commercial letters of credit

Commercial letters of credit also specify details on the purchase or sale of goods including price, required shipping documents, payment terms, shipping terms, time frames and other transaction details contained in the underlying contract.

Import letters of credit

The issuing bank substitutes its credit standing for yours or that of your business resulting in enhanced purchasing power, reducing the seller's risk and improving cash flow.

Export letters of credit

The foreign bank substitutes its credit standing for that of your buyer, reducing your risk and improving cash flow.

We Can Help

What we can do

First Citizens can make your international transactions easier and more efficient.

  • Issue import letters of credit, ensuring compliance with international trade practices
  • Carefully examine all documents to ensure compliance with commercial letters of credit
  • Make payment only when documentation conforms to the terms of a commercial letter of credit
  • Consult with you on the proper structure of commercial letters of credit and relevant documentation
  • Provide you with competitive rates and industry expertise
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FAQ

People often ask us

Commercial letters of credit, often referred to as trade letters of credit or documentary letters of credit, are bank-issued documents that help buyers ensure suppliers get paid the purchase price of goods during an international sale. It also assures a supplier that they'll be paid as long as they comply with the terms and conditions of the letter of credit, regardless of the buyer's ability to pay.

Commercial letters of credit may be used during international trade transactions to help reduce risk and ensure timely payment. Buyers and sellers don't always know one another, so a commercial letter of credit helps to establish assurance. For importers, a commercial letter of credit may ensure that your business only pays for goods after the supplier has provided evidence of shipment.

Commercial letters of credit are paid directly to a beneficiary from an issuing bank. Standby letters of credit are a secondary payment method and are drawn upon by the beneficiary only when the applicant fails to meet the underlying obligation.

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