What are Some Uses for a Letter of Credit?
Many companies and individuals have an established letter of credit. Essentially, a letter of credit is the amount of credit that a lender is willing to extend to a borrower over a period of time, based on the financial stability of the borrower. In some cases, a letter of credit involves the establishment of a loan that is extended by a financial institution for a specific purpose, with some sort of payments expected along the way. At other times, the structure of the letter of credit is not tied to specific purpose, with the credit being open to use as the borrower sees fit. Here are some examples of the more common forms of a line of credit, and what types of commitments are expected on the part of the borrower. Perhaps the single most common example of a letter of credit is the provisioning of a credit card to an individual or company. Generally, a credit card is extended with a limit on the amount of credit that the cardholder may employ. In return for accepting the card and the p
