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A Letter of Credit is a bank's written promise to pay a seller when they deliver goods to a buyer, commonly used in Singapore's international trade. It acts as a safety net, ensuring sellers get paid and buyers receive their merchandise, especially when dealing with unfamiliar overseas partners.

Under Singapore's UCP 600 rules, the bank carefully checks all shipping documents before releasing payment. This makes Letters of Credit particularly valuable for major exports, complex transactions, or when trading with new business partners across Asia-Pacific markets. The bank essentially stands between both parties, reducing their risks and smoothing out cross-border deals.

Letters of Credit prove most valuable when you're entering significant trade deals with new overseas partners, especially in high-value transactions across Asia-Pacific markets. They're particularly crucial for Singapore companies exporting specialized equipment, bulk commodities, or when dealing with unfamiliar buyers in emerging markets.

Use them when payment security is paramount - for example, in deals worth over SGD 100,000, when shipping timeframes exceed 30 days, or if your trade partner operates in a country with complex banking regulations. The protection becomes essential for manufacturers requiring advance payments for custom orders or exporters shipping perishable goods across multiple jurisdictions.

• LC Letter Of Credit: The standard form used in Singapore trade, offering basic payment security for both parties
• Export Letter Of Credit: Specifically designed for Singapore exporters, with added protections for international shipping
• At Sight LC: Ensures immediate payment upon document presentation, ideal for urgent transactions
• Standby Letter Of Credit: Acts as a backup payment guarantee, only activated if the buyer defaults
• Usance Letter Of Credit: Allows deferred payment terms, typically 30-90 days after shipment

• Issuing Banks: Singapore-based financial institutions that review applications and issue Letters of Credit, typically major banks like DBS or OCBC
• Exporters/Sellers: Businesses shipping goods who receive payment security through the LC, often Singapore manufacturers or trading companies
• Importers/Buyers: Companies purchasing goods who arrange the LC through their bank, providing assurance to sellers
• Trade Finance Officers: Bank specialists who verify documentation and ensure compliance with UCP 600 rules
• Shipping Companies: Logistics providers who handle goods and issue crucial transport documents required for LC payment

• Trade Details: Gather exact product specifications, quantities, pricing, and shipping terms between parties
• Bank Information: Confirm participating banks' details and their specific LC requirements under MAS guidelines
• Document List: Prepare required shipping documents, including bills of lading, commercial invoices, and certificates of origin
• Payment Terms: Specify payment conditions, currency, and validity period clearly
• Draft Review: Use our platform to generate a compliant LC draft, then check all details match your trade agreement
• Final Verification: Double-check beneficiary names, amounts, and delivery terms before bank submission

• Document Identification: Clear labeling as Letter of Credit, unique reference number, and UCP 600 declaration
• Party Details: Full legal names and addresses of applicant, beneficiary, and issuing bank
• Transaction Terms: Precise description of goods, currency, amount, and expiry date
• Payment Conditions: Specific documents required for payment and presentation deadline
• Shipping Terms: Port of loading/discharge, latest shipment date, partial shipments status
• Governing Law: Reference to Singapore law and applicable international rules
• Bank Undertaking: Clear statement of bank's payment obligation upon compliant presentation

A Letter of Credit differs significantly from a Credit Agreement in both purpose and function within Singapore's banking framework. While both involve financial commitments, they serve distinct roles in business transactions.

• Payment Guarantee: Letters of Credit provide immediate payment security for specific trade transactions, while Credit Agreements establish ongoing borrowing terms
• Duration: LCs typically cover single transactions with fixed expiry dates, whereas Credit Agreements create long-term lending relationships
• Bank's Role: In LCs, banks act as independent guarantors who pay upon document presentation; in Credit Agreements, they're direct lenders
• Documentation: LCs require specific shipping documents for payment release; Credit Agreements focus on financial covenants and repayment terms
• Legal Framework: LCs follow UCP 600 rules and international trade laws; Credit Agreements primarily operate under Singapore's banking and contract laws