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Letter of credit

What type of product is it?

A letter of credit is a multi-party financial contract between a lender, its customer (buyer) and a beneficiary (seller), guaranteeing the latter that it will be paid once the conditions of the letter of credit have been met. The letter of credit secures a transaction for both buyer and seller. It is often used to secure international transactions between importing and exporting companies, or between different parties wishing to demonstrate their solvency.

What are the special features of this financial product?

  • The letter of credit is used to set out payment conditions (quality, functionality, performance criteria, etc.) and to guarantee payment.

What are the advantages of this financial product?

  • Obtaining a letter of credit is a solid guarantee of solvency, and can help avoid a number of problems during a transaction.
  • For the buyer, a letter of credit demonstrates solvency and the seriousness of the transaction, without risking loss of funds (if payment conditions are precise and clearly stated).
  • For the seller, payment of the agreed amount is guaranteed by the financial institution, if the agreed conditions are met.

In addition to answering your questions, our SADC experts can help you make a real analysis of your situation. What's more, an analysis of your long-term needs and the determination of an appropriate financial strategy for your business could be developed at the same time.

See the list of different needs to the right that this financial product can meet. Don't hesitate to apply for financing from SADC. We'll be happy to support you as you think about your project and bring it to fruition.

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For information on CFDC or BDC services, financing or technical assistance, please contact your local CFDC or BDC. 

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