Trade & import · letters of credit
Bank-backed payment guarantees for international trade.
A letter from your bank to your supplier's bank, guaranteeing payment when documentary conditions are met. Standard instrument for new international trading relationships. Reduces supplier risk and often improves your supplier pricing.
What it is, when it fits
Plain English, with the trade-offs.
A letter of credit (LC) is a documentary payment instrument issued by an importer's bank to an exporter's bank, guaranteeing payment when specific shipping and documentary conditions are met. The structure is centuries-old in concept and codified internationally under UCP 600 (Uniform Customs and Practice for Documentary Credits). Practically: the importer applies to their bank for the LC, the bank issues it to the exporter's bank, the exporter ships the goods, presents conforming documents to their bank, the documents are checked against the LC terms, and payment flows through the banking system. LCs are particularly valuable for new international trading relationships, large one-off orders, suppliers in higher-risk jurisdictions, and custom-manufacturing scenarios where the supplier needs upfront payment certainty before producing. Pricing typically 0.25% to 1% per quarter on the amount, plus issuance and amendment fees. The major banks dominate this space because their international correspondent networks make global LCs reliable.
Pen on a settlement document, two people deciding together.
Typical scenarios
First international supplier relationship
Why: New supplier, no trading history, supplier wants upfront certainty.
Outcome: Confirmed irrevocable LC, ~$200K, 90-day term.
Large one-off order
Why: Annual large order, supplier requires payment certainty.
Outcome: Sight LC, ~$500K, 60-day term.
Supplier in higher-risk jurisdiction
Why: Specialist supplier in country with limited bank reach.
Outcome: Confirmed LC with second-tier confirming bank, additional confirmation fee accepted.
Custom manufacturing requiring upfront commitment
Why: Bespoke manufacturing run, supplier needs commitment before tooling.
Outcome: Standby LC plus partial cash deposit, structured staged payment.
Lenders for this product
Who we work with.
- NAB Trade
- CommBank Trade
- ANZ Trade
- Westpac Trade
- HSBC Australia
Lender accreditation varies; not every lender is available for every deal. We pick from the panel based on your specific situation.
How it works
From brief to settlement.
- 01
Trade flow review
We review supplier relationship, jurisdiction, order pattern, and trading history to determine the right LC structure.
- 02
Bank introduction
LCs run through bank trade desks rather than the generic application desk. We make the introduction directly.
- 03
LC drafting and issuance
LC terms drafted, agreed by both sides, issued through the banking system. Typical timeline 5 to 10 working days from agreed structure to issuance.
- 04
Document presentation and payment
Supplier ships, presents documents, payment flows on conforming presentation. We support amendment requests during the LC life.
Indicative pricing & terms
Ranges, not promises.
Rate range
0.25 to 1% per quarter on amount
Loan size
Per-LC, typical $50K to $10M+
Term
30 to 180 days, sometimes longer
Security
Cash margin, working-capital line, or trade finance facility
Indicative only; specific pricing depends on lender, security, and your business profile.
Frequently asked
Honest answers, plain English.
How do LCs work practically?
Importer applies to bank, bank issues LC to supplier's bank. Supplier ships and presents documents (bill of lading, commercial invoice, insurance certificate, etc.). Documents checked against LC terms. If conforming, payment flows; if discrepant, the LC fails until documents are corrected or the importer waives the discrepancy.
Sight vs usance LC?
Sight LC pays on presentation of conforming documents. Usance LC pays at a specified time after acceptance (typically 30, 60, or 90 days), giving the importer effective credit from the supplier. Usance is more common for established supplier relationships.
Confirmed vs unconfirmed?
Confirmed LC means a second bank (usually the supplier's bank or a major correspondent) adds its own payment guarantee on top of the issuing bank's. Common for suppliers in countries where the issuing bank's reputation is unfamiliar. Adds a confirmation fee.
Standby LCs?
A standby LC pays only if the importer fails to pay directly. Effectively a payment guarantee rather than a primary payment instrument. Common for ongoing supplier relationships where direct payment is the default but the supplier wants insurance.
Documentary discrepancies and rejection?
LCs are paid against documents, not against the underlying goods. Even minor discrepancies (typo on invoice, misspelt address) can cause rejection. UCP 600 sets the framework. Most rejections are resolved by document correction or importer waiver, but they cause delays.
Trade finance vs LC?
Trade finance includes LCs as one instrument among many. LCs are payment guarantees; trade finance also includes facilities that fund the cash cycle. Most importers use both.
Related products
If this isn't quite the fit.
Next step
Twenty minutes, no obligation.
Tell us the shape of the deal and the timing. We'll send a lender shortlist for letters of credit or, if it isn't the right fit, an honest signal of what is.