Issuance and Closing of Letters of Credit
|Letters of credit are used as a form of settlements in commercial transactions along with advance payment, encashment, and bill payment. In international trade, letters of credit are used as a means for financing transactions similar to bank guarantees.
The advantages of this form of cashless payments are the guaranteed payment to the supplier and the bank’s supervision of compliance with the delivery terms and terms of the letter of credit. In addition, financial resources are usually not diverted from the business process. However, a weak point is a fairly complex documentation.