Payment term

LETTER OF CREDIT TYPE
PAYMENT TERM
Bastien Tartu, Antoine Mayer, Baryan Regragui, Fleur Algoud, Rania
Nehali, Chloe Fitzgerald

The topics for discussion
What we’re going to talk
about
Definiton
Process
Use
Advantages and disadvantages
International trade

Definiton
There are five commonly used types of
letter of credit. Each has different
features and some are more secure than
others. Sometimes a letter of credit may
combine two types, such as 'confirmed'
( an additional guarantee to the original
letter of credit obtained by a borrower
from a second bank) and 'irrevocable'.

There are two main types of letters of credit:
Revocable Letter of Credit:
This type of letter of credit can be cancelled or
modified by the issuing bank at any time without
prior notice to the beneficiary (seller). However, this
type of letter of credit is rare and not widely used.
Irrevocable Letter of Credit:
This type of letter of credit cannot be cancelled or
modified without the agreement of all parties
involved, including the beneficiary, the issuing
bank, and the buyer. This provides a level of
security to the seller that they will be paid for their
goods or services, as long as they meet the
conditions specified in the letter of credit.

Type of letter of credit
Description
Standby
A standby letter of credit is an assurance from a
bank that a buyer is able to pay a seller. The seller
doesn't expect to have to draw on the letter of
credit to get paid.
Back-to-back
Back-to-back letters of credit may be used when an
intermediary is involved but a transferable letter of
credit is unsuitable.