What is a Letter of Credit? Why do you pay my suppliers this way?
*Some information sourced from Wikipedia
A standard, commercial letter of credit (LC) is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking.
All different types of payment can be negotiated with your supplier, however most trade financiers preferred payment method is a letter of credit.The reasons why a financier uses letter of credit instead of funding upfront is it protects against things like loss, incorrectly produced product and failure to deliver. Payment is received once goods are produced. It covers you against all the associated risk when paying upfront.