Letters of Credit: Special Features

Letters of credit are a means of payment in trade finance. The bank that issues the letters on behalf of the applicant, the buyer, promises to pay the seller once the seller has satisfied all that was required of it in the trade agreement. But letters of credit are used for more than the purpose they were originally intended for. We see how they are used for pre-shipment finance, as make-weight in other trade deals, and how they can be altered to make them suitable for recurring payments.