In basic terms, a Documentary Credit (DC) is an undertaking by a bank to make a payment provided the terms of the DC are met. There are several types of DC – the main difference is that some are more suited to transactions involving middlemen or traders.
Import & export
Documentary Credit Comparison Table
A quick guide to the most common types of Documentary Credit (DC).
Which Documentary Credit is right for you?
DC | Back-to-back DC | Transferable DC | Transferred DC | Standby DC | |
|---|---|---|---|---|---|
Specific to transactions involving traders | No | Yes | Yes | Yes | No |
Buyer requires credit facility to issue DC | Yes | Yes* | Yes | No | Yes |
Degree of freedom to specify terms of DC | High | Medium** | High | Low | High |
Supplier is guaranteed payment if terms are met | Yes | Yes | Yes | Yes*** | Yes |
DC issued on a transaction-by- transaction basis | Yes | Yes | Yes | Yes | No |
Degree of ease for supplier to obtain finance | High | High | High | Medium | High |
*Terms may be better due to support of Master DC
** Some terms to follow Master DC
*** If the terms of the Transferable DC are met
Disclaimer:
Global Trade and Receivables Finance transactions may be subject to credit approval. Other restrictions, including specific country regulations, may apply. Foreign currency exchange rates may apply to certain trade transactions.
Reminder: "To borrow or not to borrow? Borrow only if you can repay!"
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