Letters of Credit

A Letter of Credit (LC) is an undertaking by a buyer’s bank to pay its suppliers for goods or services, subject to agreed conditions.

LCs are used extensively in the financing of international trade because it protects suppliers against non-payment, and offers the assurance that both parties will fulfil their obligations in the trade.

Compared to traditional methods, such as cash payments or wire transfers, an LC provides increased protection against the risks associated with cross-border transactions. It also ensures timely payment and facilitates easier access to working capital finance.

For buyers, an Import LC can potentially help you secure your purchases internationally and gives you the ability to negotiate better contract terms, such as increasing supplier’s credit period.

For suppliers, an Export LC minimises export payment risk and provide easier access to financing without the need for a credit facility.

To cater your dynamic business needs, we also offer and support various types of LCs to help secure payment at selected HSBC offices across the globe:

• For traders, sourcing offices or intermediaries, you can secure payment from the ultimate buyer while giving the ultimate supplier payment assurance to ship the goods via a Back-to-Back-LC or simply instruct HSBC to transfer your LC to your supplier.
• As a buyer, you can ask HSBC to issue an LC that allows the seller to get paid in advance from HSBC against compliant documents.

As a leading international bank backed by a strong balance sheet, HSBC consistently manages large trade flows, holds a strong reputation, and is trusted by corporations globally.

• A global footprint: We have one of the largest networks of bank relationships, and can support LCs between trade counterparties virtually anywhere and in multiple currencies.
• Dedicated expertise: Our experienced team aid you in LC issuance and document checking.
• Digital innovation: We provide advanced digital platforms that can streamline the process of applying and managing LCs, reducing paperwork and enabling real-time visibility of your transactions 24/7 with our state-of-the-art HSBC Trade Solutions (HTS).

Contact your HSBC representative to find out more.