Uncollateralized Letters of Credit

There’s a particular type of LC which is a niche product but very useful in some industries.  We're referring to an uncollateralized documentary letter of credit. Issuers of such letters of credit structure the LC in a way to manage their own capital risk and hold the shipment as collateral pending payment by the client needing the LC. 

Sometimes importers may not want to draw down their bank lines for the month or two it takes for the supplier to get ready to ship the goods, but they can pay for the shipment when it is on the water. 

Sometimes suppliers need to receive an LC so that their bank will provide finance for the shipment, but the customer will make an arrangement to pay the supplier OUTSIDE the LC. In such a case, customer and supplier may well settle between their respective regular banks, but never negotiate the LC.  Indian clients may recognize this by another name, as it is sometimes called an accommodation letter of credit. 

This is commonly used in the garment industry and is easily accepted in many spots in Southeast Asia, and often for consumer products as well.  

We generally don't recommend this type of LC for commodity transactions like sugar or rice, because usually the letter of credit structure does not suit the needs of that type of transaction or the professionals in that market.


Next Steps



  1. You request an LC application, complete it and submit it to us.

  2.  We prepare a draft LC which you and your supplier can review.

  3.  Upon approval, you pay opening charges, and provide simple documentation which we submit to issuing bank.

  4. The LC is usually issued within one to two business days, via SWIFT in most cases.  In those rare circumstances where there are limited  SWIFT capabilities for delivery, the LC is sent out by courier, with instructions so that receiving bank can authenticate the letter of credit.




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