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English definition of “letter of credit”

letter of credit

noun [C]
 
 
(plural letters of credit) ( abbreviation L/C)
FINANCE, COMMERCE a financial document in which a bank formally promises to pay a particular amount of money into the bank of a person selling goods if the goods are delivered by an agreed date and in an acceptable condition. Buyers often use letters of credit to buy goods from other countries: The bank issued the letter of credit on the instructions of the importer. For export sales, the price of the goods are secured by a letter of credit.
FINANCE in a situation in which bonds, etc. are sold, a written promise by a bank to pay the lender if the borrower is unable to do so: The notes are secured by bank letters of credit.
→ See also confirmed letter of credit, documentary letter of credit, irrevocable letter of credit, confirmed letter of credit, standby letter of credit
(Definition of letter of credit from the Cambridge Business English Dictionary © Cambridge University Press)
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