Documentary Credit (also known as the Letter of Credit – LC) is a financial instrument issued by a bank that guarantees payment to a seller as long as the seller meets the terms and conditions specified in the letter of credit, such as providing specific documents.
Put simply: it’s a bank’s promise to pay the seller on behalf of the buyer if specific documents are presented that comply with the credit terms. Documentary credit reduces payment risk and provides security for both the buyer and the seller, building trust and stronger business relationships.