What is a letter of credit?

A letter of credit (LC) is a guarantee from a bank or financial institution that a seller will receive payment once specific terms and conditions are met (such as delivery of goods). Letters of credit are commonly used in international trade to reduce payment risk. There are several types including documentary LCs, standby LCs, and confirmed LCs. Spark Finance can arrange letters of credit for UK importers and exporters through our specialist trade finance panel.