Letters of credit
A financier guarantees payment to the seller once conditions are met, and that goods are shipped before the buyer pays. Reduces non-payment, currency and political risk on international contracts.
- Range
- By contract value
- Term
- Shipment cycle
- Family
- trade
- Search
- Full market, one file
At a glance
- Buyer and seller protection
- Shipment before payment
- Document-driven
- International trade
How it works
- 1The importer’s bank issues a letter of credit against a purchase order, if the buyer is creditworthy.
- 2The exporter’s bank checks the LC. Once terms are verified, the exporter ships.
- 3On presentation of compliant documents (typically a bill of lading), the exporter is paid.
- 4Documents go to the importer’s bank and the importer reimburses under the LC.
- 5Payment is only released when conditions are met — goods shipped, documents in order.
Who it’s for
- Importers and exporters who do not want open-account or raw TT risk
- International contracts where the parties have not traded together for long
Good to know
LCs are document-driven. A discrepancy in the paperwork can delay or void payment.
Approval can be slow (weeks, occasionally longer) and the line sits against the importer’s banking facilities.
They reduce risk; they do not eliminate it. Enhanced import/export lines are often used alongside.
One application with QED searches the full market. That saves you running the same file around several lenders, and it avoids multiple credit searches on the business and directors. A hard search is only placed when you proceed with a chosen lender.
Documents QED will ask for
Same list as the attach-files section on the website application. Tick what you have when you apply; email the rest.
- Last published accounts (full accounts, not abbreviated)
- Latest management accounts if year-end is stale
- Last 3 months’ business bank statements
- Pro-forma invoice
- Purchase order
- Commercial invoice
- Contract of sale
- Transport document / bill of lading (if shipped)
- Buyer and supplier names and addresses
FAQ
Drawn from qedfinance.com and the way the UK market actually underwrites these facilities.
Who is protected?
The seller gets a bank-backed promise of payment if they present compliant documents. The buyer knows goods have been shipped before funds move.
Is an LC enough on its own?
Often not. It does not always fund the production cycle or the import bill after landing. Import finance and invoice finance sit around it.
What is a letter of credit?
A trade instrument that lets buyer and seller reduce non-payment, currency and political risk. The importer’s bank issues an LC against a purchase order; the exporter ships once terms are verified and is paid on compliant documents.
Does an LC eliminate risk?
No. LCs are full of detailed provisions. A discrepancy in the paperwork can delay or void payment. Approval can take weeks, occasionally months, and the line sits against the importer’s banking facilities.
Do I need to be creditworthy?
Yes — importers can only use an LC if the issuing bank will take them, and it will affect their banking operations.
Why not just pay by telegraphic transfer?
A plain TT is fast but puts all risk on the buyer — you may pay for goods that never ship or fail quality. An open account does the opposite and loads the exporter. Trade finance is the middle path.
Can products be combined?
Yes. Import finance is often paired with a letter of credit and then repaid from invoice finance once goods are sold on.
Ready to discuss this facility?
Start a short application and QED will help you compare the available market.
Start an applicationQED is a broker, not a lender. A low credit score can limit options with some houses; a search with us does not place a hard search on the business or directors until you proceed with a chosen lender.