Letter of Credit Templates and Samples

What Is a Letter of Credit?

A Letter of Credit is a special type of bank guarantee that confirms the bank's promise to pay the seller (beneficiary) on behalf of the buyer (applicant) a specified amount of money that covers the purchaser's contractual obligations. If you are looking for a Letter of Credit template suitable for your situation, you may check out our library below.

Whether the parties engage in international trade where the goods are delivered for a certain sum of money or there is a performance transaction and the contractor must work on a building project, a Credit Letter serves as a guarantee that both parties intend to carry out their contractual duties and are prepared to enlist the support of a financial institution to show their goodwill.

Credit Letter Types

Below you can find the most commonly used Letter of Credit templates - ensure the full and timely payment to the beneficiary of the contract and build a trusting relationship with your business partner.

  1. Generic Letter of Credit. This is a generic template you can prepare for any occasion whether the transaction you need to secure is small or large, domestic or international.
  2. Standby Letter of Credit. Clients can benefit from this secondary payment option that safeguards the interests of the seller in case the purchaser can no longer make payments.
  3. Irrevocable Letter of Credit. Quite similar to the document above, this bank guarantee cannot be modified by the choice of one of the parties or the bank.

How to Write a Letter of Credit?

Each document is unique, and it is up to the bank to determine which provisions are listed in the final version of the letter. However, at a minimum, consider including the following details in your Letter of Credit:

  1. Identification of the bank, beneficiary, and applicant.
  2. Description of the original contract between the parties that will be covered by the credit and a short reference to the contractual obligations that must be fulfilled.
  3. The unequivocal promise of the bank to pay on behalf of the breaching party - here you can choose which events and notifications trigger the payment.
  4. The expiration date of the bank offer to secure the payment.
  5. A Letter of Credit fee - generally, paid by the seller.
  6. Signatures of the parties.

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This letter, issued primarily by banks, is used in trade finance and provides an irrevocable payment undertaking.

This is an irrevocable agreement completed by a buyer and the buyer's bank in which the bank agrees to pay the seller as soon as certain conditions are met.

This letter is a legal instrument that secures a bank's commitment to pay the seller in the event that the buyer (the client of the bank) defaults on the agreement.

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