Different Types of Letter of Credit || Trade Hunt Management

Course Details

Bank
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Different Types of Letter of Credit

By Sudhakar Sanjeevi
16/Dec/2025
1 Students

Course Description

A Letter of Credit (LC) is a bank’s undertaking to pay a beneficiary provided that the terms and conditions of the credit are complied with. There are several types of letters of credit used in international trade to meet different commercial needs. A Sight LC provides immediate payment upon presentation of compliant documents, while a Usance or Deferred Payment LC allows payment at a future date. A Confirmed LC adds the undertaking of a second bank, reducing country and bank risk for the exporter. A Standby Letter of Credit (SBLC) functions as a guarantee, payable only in case of default. A Transferable LC allows the beneficiary to transfer part or all of the credit to another party, commonly used by intermediaries. Other types include Revolving, Back-to-Back, and Red Clause LCs. Understanding different LC types helps parties manage risk, cash flow, and trade efficiency effectively.