What is a letter of credit and how does it work?-Letter of credit

A letter of credit or “credit letter” is a letter from a financial institution guaranteeing that a customer’s settlement to a vendor will be obtained promptly and for the correct quantity. In the event that the buyer is unable to make a settlement on the acquisition, the bank will certainly be needed to cover the full or staying quantity of the acquisition.
A letter of credit is a file that assures the purchaser’s payment to the sellers. It is provided by a bank and makes certain the timely and complete repayment to the seller.