A letter of credit (LOC) is a document issued by a bank that guarantees payment to a seller for goods or services. It is a common method of payment in international trade, as it provides security to both the buyer and the seller. The LOC is issued at the request of the buyer (the importer) and is sent to the seller (the exporter). It states the amount of money that the bank will pay to the seller, the terms of payment, and the conditions under which the payment will be made.
LOCs are an important tool in international trade, as they provide security to both the buyer and the seller. They can help to reduce the risk of non-payment, fraud, and other problems that can occur in international transactions. LOCs have been used for centuries, and they remain an essential part of the global trading system.