A confirmed LC is a Bank Credit Letter where the payment guarantee of the seller or exporter is backed up by a second bank or a confirming bank. In simple words, in case if the first bank defaults to pay, or a seller isn't satisfied with the creditworthiness of the first bank, he may require a confirmed irrevocable letter of credit, so that the payment will be covered by the second bank. This type of trade finance payment method contains an LC confirmation and is used by importers and exporters in international trade where an additional guarantee is provided to the original LC from a second bank. The borrowers are required to apply for the confirmed LC if the seller is not convinced about the assured payment.
Tags: Bank Credit Letter,trade finance,
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