Letter Of Credit Definition

letters-of-credit

noun

A letter from a bank asking that the holder of the letter be allowed to draw specified sums of money from other banks or agencies, to be charged to the account of the writer of the letter.

Webster's New World

A financial instrument, typically issued by a bank, in which the issuing institution commits to pay a draft presented by a third party in a specified format or meeting certain criteria.

Webster's New World Law

(finance, banking) A document, used primarily in trade finance and issued generally by a financial institution, in which the institution promises to pay debts up to a certain limit to be acquired by the beneficiary against delivery of documents specified in the letter.

Wiktionary