Associated with letter of credit, the two negatives are importer has to pay the bank's fee for the letter of credit and it could limit the importer's ability to borrow since it is a liability. In the other side, letter of credit also has a positive impact through the importer or also exporter.
A credit letter or generally also known as a letter of credit, can be described as a document from other financial institution guaranteeing or also a bank that a specific payment will be made in a business transaction. A credit letter or generally also known as a letter of credit importantly the process involves an impartial third party in the transaction.
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