A Documentary Credit (D/C), also known as Letter of Credit (L/C) is a payment method where OP as the issuing bank of the documentary credit undertakes to remit the payment to the seller on behalf of the buyer (your company). To receive the payment, the seller must present the documents specified in the terms of the documentary credit to its bank during the validity of the documentary credit.
Your company gets several benefits by using import documentary credits:
- You can receive payment time and boost your company’s working capital management.
- You can ensure the delivery of goods on time and receive the documentation needed for imports.
- You can prove your payment capacity and creditworthiness as a buyer by opening a documentary credit.
The documentary credit is a reliable payment method: as a buyer, you are obligated to pay only when the terms of the documentary credit are met. A covered documentary credit also protects the buyer against currency risk.