Trade Finance Letter Of Credit
[Your Bank's Letterhead]
[Date: [Insert Date]]
[LC Number: [Insert LC Number]]
[Issuing Bank: [Insert Issuing Bank Name]]
[Address: [Insert Issuing Bank Address]]
[Swift Code: [Insert Swift Code]]
[Applicant: [Insert Buyer's Name]]
[Address: [Insert Buyer's Address]]
[Contact: [Insert Buyer's Contact Information]]
[Beneficiary: [Insert Seller's Name]]
[Address: [Insert Seller's Address]]
[Contact: [Insert Seller's Contact Information]]
[LC Amount: [Insert LC Amount in Currency]]
[Currency: [Insert Currency Code]]
[Expiry Date: [Insert Expiry Date]]
[Partial Shipments: [Allowed/Not Allowed]]
[Transshipment: [Allowed/Not Allowed]]
[Description of Goods/Services:]
[Insert Description of Goods/Services as per Proforma Invoice]
[Terms and Conditions:]
1. The Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (UCP 600).
2. The beneficiary must present the following documents to the bank for payment within [Insert Number] days from the date of shipment:
- Signed Commercial Invoice in [Insert Number] original copies.
- Clean On Board Bill of Lading marked "Freight Prepaid" and endorsed to the order of [Issuing Bank Name].
- Packing List in [Insert Number] original copies.
- Certificate of Origin in [Insert Number] original copies.
- [Insert Additional Required Documents]
3. All documents must be in English and comply with the specifications as per the LC.
4
Letter of Credit Request to Bank
Subject: Request for Issuance of Letter of Credit
Dear Sir/Madam,
I am writing to formally request the issuance of a Letter of Credit in favor of our supplier, M/S Global Trading Ltd., for the purpose of importing machinery required for our production unit. The total transaction value amounts to USD 250,000, and the terms agreed with the supplier require payment via an irrevocable Letter of Credit.
We kindly request you to issue this Letter of Credit under the following terms:
- Amount: USD 250,000
- Beneficiary: Global Trading Ltd.
- Validity: 90 days from the date of issue
- Payment Terms: At sight against shipping documents
We have enclosed the proforma invoice, purchase order, and our company’s trade license for your reference. Kindly debit the applicable margin and charges from our account number 123456.
We look forward to your prompt assistance.
Yours sincerely,
[Your Name]
[Your Position]
[Your Company Name]
Letter of Credit Amendment Request
Subject: Request for Amendment of Letter of Credit
Dear Sir/Madam,
We refer to Letter of Credit No. LC-789 issued on March 10, 2025, in favor of Star Electronics Ltd. Due to an update in the contract terms, we kindly request an amendment to extend the validity of the LC by an additional 30 days.
Additionally, we request the shipment terms to be revised from CIF Dubai to FOB Singapore, as mutually agreed with the supplier.
Kindly process the amendment at the earliest and debit the applicable charges to our account number 456789.
Thank you for your continued support.
Best regards,
[Your Name]
[Your Position]
[Your Company Name]
Letter of Credit Cancellation Request
Subject: Request for Cancellation of Letter of Credit
Dear Sir/Madam,
I am writing in reference to Letter of Credit No. LC-321 issued on February 20, 2025, in favor of Horizon Supplies Ltd. Due to unforeseen circumstances, the purchase agreement has been mutually cancelled with the supplier.
Therefore, we kindly request the cancellation of the above LC and release of the blocked margin amount. We have enclosed the supplier’s written confirmation of cancellation for your records.
Please proceed with the necessary steps and confirm once the LC has been officially cancelled.
Yours faithfully,
[Your Name]
[Your Position]
[Your Company Name]
Letter of Credit Payment Advice
Subject: Request for Payment Under Letter of Credit
Dear Sir/Madam,
We refer to Letter of Credit No. LC-654 issued in favor of Oceanic Traders Ltd. The beneficiary has presented all required documents as per the terms of the LC, and we have verified their compliance.
Kindly honor the payment as stipulated in the LC agreement. The amount due is USD 150,000 payable at sight.
Please debit the required funds from our account number 789123 and confirm the transaction completion.
Sincerely,
[Your Name]
[Your Position]
[Your Company Name]
Letter of Credit Acceptance Message
Subject: Confirmation of Acceptance of Letter of Credit
Dear [Supplier’s Name],
We are pleased to confirm that our bank has issued the requested Letter of Credit under the agreed terms for the upcoming shipment. The LC details are as follows:
- LC Number: LC-987
- Amount: USD 300,000
- Validity: 120 days
- Payment Terms: 30 days after Bill of Lading
Kindly proceed with shipment arrangements in line with these terms. We look forward to receiving the goods as per schedule.
Thank you for your cooperation.
Warm regards,
[Your Name]
[Your Position]
[Your Company Name]
Letter of Credit Discrepancy Notification
Subject: Notification of Discrepancies in Letter of Credit Documents
Dear [Supplier’s Name],
We have received the documents presented under Letter of Credit No. LC-555. Upon review, we found the following discrepancies:
- Invoice amount does not match the LC value.
- Shipment date exceeds the allowed deadline.
We kindly request you to provide clarification or revised documents at the earliest, as these discrepancies may affect payment processing.
Please treat this as urgent.
Sincerely,
[Your Name]
[Your Position]
[Your Company Name]
Letter of Credit Extension Request
Subject: Request for Extension of Letter of Credit Validity
Dear Sir/Madam,
We kindly request an extension of Letter of Credit No. LC-246, originally issued in favor of Golden Exports Ltd., for an additional 45 days. The supplier has informed us of shipping delays due to customs clearance issues.
We request that the LC validity be extended until June 30, 2025, with all other terms remaining unchanged. Kindly debit applicable charges from our account number 112233.
We appreciate your support and request confirmation once the extension has been processed.
Yours sincerely,
[Your Name]
[Your Position]
[Your Company Name]
Why do you need a trade finance letter of credit?
A Letter of Credit (LC) is a financial instrument issued by a bank to guarantee payment to a supplier on behalf of the buyer. It reduces risks in international trade by ensuring that sellers receive payment once they meet the agreed shipping and documentation terms. Buyers use it to build trust with overseas suppliers, while suppliers rely on it for payment security.
Who should send a trade finance letter of credit?
- Importing companies requesting their bank to issue a Letter of Credit.
- Exporters requesting confirmation or amendments from buyers’ banks.
- Corporate finance teams handling international trade transactions.
- Business owners managing large procurement contracts across borders.
Common mistakes to avoid in a letter of credit request
- Providing incomplete beneficiary or account details.
- Forgetting to attach supporting documents like purchase orders or proforma invoices.
- Using vague shipment terms that may cause disputes later.
- Missing deadlines for amendments or extensions.
- Not double-checking spelling of company and bank names.
Formatting guidelines for a letter of credit
- Keep the letter formal and professional.
- Clearly mention LC number, amount, validity, and payment terms.
- Attach supporting documents wherever required.
- Use concise language with no ambiguity.
- Ensure consistency with trade agreements and contracts.
What happens after sending a letter of credit request?
- The bank reviews the request and verifies supporting documents.
- Charges and margins are debited from the applicant’s account.
- The LC is issued and shared with the beneficiary’s bank.
- The supplier arranges shipment and submits required documents.
- Payment is made once conditions are satisfied.
Pros and cons of using a letter of credit in trade finance
Pros:
- Guarantees payment to the seller.
- Builds trust between international partners.
- Minimizes risks of fraud and default.
- Allows buyers to negotiate better trade terms.
Cons:
- Involves bank charges and margin requirements.
- Requires strict compliance with documentation.
- Can be time-consuming to amend or cancel.
Key elements and structure of a letter of credit request
- Subject line clearly stating purpose (e.g., "Request for LC Issuance").
- Buyer details and bank account information.
- Beneficiary details and contract reference.
- LC amount, currency, validity, and payment terms.
- List of required supporting documents.
- Closing request for prompt processing.
Frequently asked questions about letters of credit
-
Q: Can an LC be cancelled once issued?
A: Only with consent of both buyer and seller. -
Q: What documents are usually required?
A: Proforma invoice, purchase order, and shipping documents. -
Q: Can an LC be transferred to another supplier?
A: Yes, but only if it is a transferable LC. -
Q: Who bears the bank charges?
A: Charges are usually borne by the applicant, unless otherwise agreed.
