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Managing Risk

Letters of Credit

What is a Letter of Credit?

A letter of credit is an irrevocable undertaking by a bank on behalf of the buyer to make payment in favour of a seller provided the documents presented comply with Letter of Credit terms and conditions.

Why use a Letter of credit?

Secure method of settlement  

Reduce the risk of non- payment for delivered goods

Once Issued are legally binding

Irrevocable and cannot be cancelled unless all parties agree

Letters of credit in detail...

Benefits

Expand into new markets

Export letters of credit could enable you to trade in markets where other types of payment could be risky.

Payment security

Ship goods in the knowledge that, providing your documentation is in order, you'll receive immediate payment or an agreement to pay in the future from us or the buyer’s bank.

Easy document management

Use MaxTrad to raise and manage your letter of credit business, allowing you to check the status of transactions through a secure online platform.

Secure finance

Letters of credit could increase your chances of securing pre-shipping finance.

Features

Import Letters of Credit

Import letters of credit reassure your overseas suppliers about receiving payment and they assure you about the receipt of your goods from overseas before you pay. This gives you confidence that the goods you buy will be as ordered, and they will be delivered at the agreed time and place.

Export Letters of Credit

Export letters of credit are payment commitments given by your buyer’s bank providing that you fulfil the terms and provide the documentation as required within the letter of credit.

Guarantee payments

When exporting to developing countries – we may consider ‘confirming’ the letter of credit. This means that, subject to the terms of the letter of credit being met and all documents being in order, we'll guarantee payment in the event that the buyer’s bank is unable to.

Factsheet

Export Letters of Credit factsheet

Our Export Letter of Credit enables you to trade goods safe in the knowledge that you will receive payment. This is because Export Letters of Credit provide a commitment given by the buyer’s bank that they will pay on behalf of their client, provided certain pre-agreed conditions are met. This product is sometimes called a Documentary Credit.

Import Letter of Credit factsheet

An Import Letter of Credit is a commitment given by us to pay your supplier on your behalf using a credit facility that you have pre-agreed. Payment is only made if we receive specified documents about the transaction from your supplier.

Ready to apply

Great, thanks for choosing Letters of Credit. If your Relationship Manager has confirmed you have a credit line in place to support this facility, apply online with our simple application form below.

Alternatively, you can always talk to your relationship manager. If you’re a new customer with an annual turnover of less than £2 million, you can give us a call on 0345 050 0519. If it’s over £2 million, call us on 0345 050 0692.

 

Customers with hearing and speech impairments can contact us by using our Relay UK Service: 18001 0345 050 0519 if your annual turnover is less than £2 million or 18001 0345 050 0692 if your annual turnover is more than £2 million.

For more information on accessibility visit: https://www.business.rbs.co.uk/business/accessibility.html

Calls may be recorded for training and monitoring purposes.

To see how much your call might cost, visit the call charge information page.

Other Trade Finance options

We offer a wide range of trade finance products, discover how these could help out with your business needs…

Bonds & guarantees, and standby letters of credit, provide companies with additional protection in respect of their business or customers, performance or financial obligations. We can issue guarantees on your behalf or receive and validate guarantees issued by other banks in your favour.

Documentary collections provide a secure way to make and receive payments during international trade.

Trade Loans tailor loans to a specific contract(s) and cover the funding gap between you paying your suppliers and being paid by your customer. They allow you to repay the loan when your customer pays you and are available to businesses with a turnover of over £2m.

To compare all of our Trade Finance products, see our Trade Finance Homepage

Additional support for your business

Managing Risk

Help protect against the impact of exchange rate fluctuations and the risk of not being paid

MaxTrad

Our secure online platform lets you manage your international trade transactions from anywhere, 24 hours a day

Something else we can help you with?