What Is a Commercial Letter of Credit?  Article Details   •
Written By: Alex Newth   • Edited By: Angela B.   • Last
Modified Date: 06 March 2014   • Copyright Protected:
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your Site/Blog   A commercial letter of credit is used during
business transactions, usually — but not always — between
international parties, to promise payment in return for products
or services. Just like other types of letters of credit, this
document explicitly details how much money will be paid to the
business providing the product or service. This letter is made
by the customer’s bank as a way of authorizing a second bank to
pay the seller. To receive payment, the seller must show the
bank documents that confirm services are complete or shipped;
otherwise the bank will not release payment. With a commercial
letter of credit, the issuing bank replaces the buyer as the
payee; if there are problems with payment, the seller goes to
the issuing bank instead of to the buyer