A Letter of Credit (LOC) is a financial instrument used in international trade transactions. It is a type of payment guarantee that is issued by a financial institution (such as a bank) on behalf of a buyer to a seller. The letter of credit serves as a promise to pay the seller a specified amount if the buyer fails to fulfill their obligations, such as paying for goods or services. The seller is required to provide documentation proving that they have met the terms of the transaction before receiving payment.
