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Letters of Credit

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Grow your trading relationships confidently with a Letter of Credit, mitigating the payment risks associated with cross-border trade and improving your cash flow.

What is a Letter 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.

Key benefits

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.

When you apply for an LC

  • you show your supplier you have the ability to pay for the goods
  • you are asking HSBC to provide payment security to your suppliers
  • you can tailor the terms of shipping, delivery, insurance and quality inspection from your suppliers in the LC

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

When you receive an LC

  • you are getting a commitment from the buyer’s bank to pay you if your documents comply with the LC conditions
  • you can mitigate your risk on the buyer’s bank by asking HSBC to add our confirmation to your LC
  • you can generally request for an advance of funds against compliant documents

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.

How does the Letter of Credit Process work?

Import Letter of Credit

Export Letter of Credit

Why HSBC?

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.

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