{"id":99909,"date":"2024-03-07T19:41:55","date_gmt":"2024-03-07T19:41:55","guid":{"rendered":"https:\/\/www.tradefinanceglobal.com\/?page_id=99909"},"modified":"2025-01-29T13:08:21","modified_gmt":"2025-01-29T13:08:21","slug":"types-of-credit","status":"publish","type":"page","link":"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/","title":{"rendered":"Types of Credit"},"content":{"rendered":"\n<div class=\"wp-block-columns container w-auto is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:33.33%\"><div class=\"block-header-without-image d-flex flex-direction-column justify-content-center\">\n    <h2 class=\"fs-32 fw-700 fs-xs-28 not-for-table-content\" id=\"heading-types-of-credit\">\n        Types of Credit    <\/h2>\n    <div class=\"d-grid grid-col-2 grid-col-xs-1\">\n                            <div class=\"\">\n                <div>Last updated on 29 Jan 2025<\/div>\n                <div>07 Mar 2024 . 5 min read<\/div>\n            <\/div>\n            <\/div>\n    <\/div><\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:66.66%\"><figure class=\"wp-block-post-featured-image\"><img loading=\"lazy\" decoding=\"async\" width=\"869\" height=\"352\" src=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit.jpg\" class=\"attachment-post-thumbnail size-post-thumbnail wp-post-image\" alt=\"\" style=\"object-fit:cover;\" srcset=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit.jpg 869w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-300x122.jpg 300w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-768x311.jpg 768w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-320x130.jpg 320w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-370x150.jpg 370w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-414x168.jpg 414w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-600x243.jpg 600w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-372x151.jpg 372w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-450x182.jpg 450w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-380x154.jpg 380w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit-285x115.jpg 285w\" sizes=\"auto, (max-width: 869px) 100vw, 869px\" \/><\/figure><\/div>\n<\/div>\n\n\n\n<div class=\"wp-block-columns container w-auto country-quick-link is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:35%\"><div class=\"block-buttons bg-anti-flash-white rounded p-24 h-100 xs-h-auto\" style=\"background-color: #f2f5f7 !important;\">\n  <div class=\"d-grid grid-col-1 grid-col-xs-1 mb-12\">\n    <h4 class=\"not-for-table-content fs-24 fw-700\" id=\"heading-most-popular\">Most popular<\/h4>\n  <\/div>\n  <div>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/\">\n        Introduction to Letters of Credit      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/benefits-of-letters-of-credit\/\">\n        Benefits of Letters of Credit      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/handling-document-discrepancies\/\">\n        Handling Document Discrepancies      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/swift-messaging-types\/\">\n        SWIFT Messaging Types      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/parties-involved\/\">\n        Parties Involved      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/financial-crime-fraud-and-sanctions\/\">\n        Financial Crime, Fraud &#038; Sanctions      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/documentary-collections\/courses\/\">\n        Letters of Credit Courses      <\/a>\n      <\/div>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:22%\"><div class=\"block-buttons bg-anti-flash-white rounded p-24 h-100 xs-h-auto\" style=\"background-color: #ebf5f4 !important;\">\n  <div class=\"d-grid grid-col-1 grid-col-xs-1 mb-12\">\n    <h4 class=\"not-for-table-content fs-24 fw-700\" id=\"heading-research-and-guides\">Research and Guides<\/h4>\n  <\/div>\n  <div>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/ucp-600-ultimate-guide\/\">\n        UCP 600 \u2013 Ultimate Guide      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/editions\/letters-of-credit-research-2022\/\">\n        Research      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/baft-guide\/\">\n        BAFT &#038; TFG Guide      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/digitalisation-and-the-future\/\">\n        Digitalisation &#038; the Future      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/documentary-collections\/\">\n        Documentary Collections      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/finance-products\/promissory-notes-bills-of-exchange\/\">\n        Promissory Notes and Bills of Exchange      <\/a>\n      <\/div>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:22%\"><div class=\"block-buttons bg-anti-flash-white rounded p-24 h-100 xs-h-auto\" style=\"background-color: #e5f5ff !important;\">\n  <div class=\"d-grid grid-col-1 grid-col-xs-1 mb-12\">\n    <h4 class=\"not-for-table-content fs-24 fw-700\" id=\"heading-rules\">Rules<\/h4>\n  <\/div>\n  <div>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/letters-of-credit-rules\/\">\n        Letters of Credit Rules      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/ucp-600\/\">\n        UCP 600      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/eucp\/\">\n        eUCP Explained      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/urc-522-eurc\/\">\n        URC 522 &amp; eURC      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/isbp-821\/\">\n        ISBP 821      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/presentation-of-documents\/\">\n        Presentation of Documents      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/dispute-resolution\/\">\n        Dispute Resolution      <\/a>\n      <\/div>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:22%\"><div class=\"block-buttons bg-anti-flash-white rounded p-24 h-100 xs-h-auto\" style=\"background-color: #E6FAFE !important;\">\n  <div class=\"d-grid grid-col-1 grid-col-xs-1 mb-12\">\n    <h4 class=\"not-for-table-content fs-24 fw-700\" id=\"heading-types\">Types<\/h4>\n  <\/div>\n  <div>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/\">\n        Types of Credit      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/restricted-letters-of-credit\/\">\n        Restricted Letters of Credit      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/difference-between-lcs-and-bank-guarantees\/\">\n        Letters of Credit vs Bank Guarantees      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/standby-letter-of-credit-sblc\/\">\n        Standby Letters of Credit      <\/a>\n          <a class=\"d-inline-block mr-10 mb-10 py-8 px-16 rounded bordered border-light text-black bg-white fs-14 fw-700\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/sight-lcs\/\">\n        Sight Letters of Credit      <\/a>\n      <\/div>\n<\/div><\/div>\n<\/div>\n\n\n\n<div class=\"wp-block-columns container w-auto is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:33.33%\">\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n<div class=\"bg-light-blue d-flex gap-16 h-auto p-16 rounded xs-flex-direction-column\">\n    <div class=\"\">\n    <img decoding=\"async\" style=\"min-width:100px;max-width: 150px\" src=\"https:\/\/secure.gravatar.com\/avatar\/adbea0e7d528d8822bada7096c1e6ea9?s=160&#038;d=mm&#038;r=g\" class=\"w-100 rounded\">\n  <\/div>\n  <div class=\"col-span-2 col-span-xs-1\">\n    <div class=\"d-flex flex-direction-column gap-16 fs-16 justify-content-between\">\n      <div class=\"fs-16 fw-700\">Mark Abrams<\/div>\n      <div class=\"fs-14 fw-400 elipsise-2-line\" title=\"Mark heads up the trade finance offering at TFG where\u00a0his team focuses on bringing in alternative structured finance to international trading companies.\">\n        Mark heads up the trade finance offering at TFG where\u00a0his team focuses on bringing in alternative structured finance to international trading companies.      <\/div>\n      <div>\n        <a class=\"text-black fs-12 small-link-arrow-right\" href=\"https:\/\/www.tradefinanceglobal.com\/posts\/?author=74\">\n          <span>\n            Latest Post          <\/span>\n        <\/a>\n      <\/div>\n    <\/div>\n  <\/div>\n<\/div>\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n<div style=\"min-height:100px!important;\" class=\"block-cta max-w-100 p-32 h-auto rounded sm-w-60 dark-mode bg-black align wp-block-acf-block-cta\">\n  <h4 id=\"heading-access-trade-receivables-and-supply-chain-finance\" class=\"fs-24 fw-700 elipsise-2-line dark:color-white not-for-table-content\">\n    Access trade, receivables and supply chain finance  <\/h4>\n  <p class=\"block-subtitle dark:color-white\">We assist companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.<\/p>\n  <a href=\"\/\" class=\"dark:text-black px-16 py-8 rounded bg-black text-white fs-14 fw-700 dark:bg-tale\">\n    <span>Get Started<\/span>\n  <\/a>\n<\/div>\n\n<div class=\"block-cta p-24 h-auto rounded\">\n    <h4 id=\"heading-\" class=\"fs-24 fw-700 elipsise-2-line dark:color-white not-for-table-content\">\n      <\/h4>\n  <p class=\"fs-16 fw-400 dark:color-white\">Download our our free Letters of Credit guide<\/p>\n  <div class=\"mb-20\">\n    <img loading='lazy' alt='Letters-of-Credit' style='width:auto; height:200px'  width='auto' height='auto' src='https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-150x150.jpg' srcset='https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-300x300.jpg 300w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-150x150.jpg 150w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-320x320.jpg 320w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-370x370.jpg 370w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-414x414.jpg 414w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-200x200.jpg 200w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-250x250.jpg 250w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-162x162.jpg 162w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-159x159.jpg 159w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-123x123.jpg 123w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit-190x190.jpg 190w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Letters-of-Credit.jpg 600w' \/>  <\/div>\n      <a href=\"https:\/\/www.tradefinanceglobal.com\/login\/?redirect_url=https%3A%2F%2Fwww.tradefinanceglobal.com%2Fwp-json%2Fwp%2Fv2%2Fpages%2F99909\"  class=\"dark:text-black px-16 py-8 rounded bg-black text-white fs-14 fw-700 dark:bg-tale\">\n      <span>Download<\/span>\n    <\/a>\n    <\/div>\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><a href=\"https:\/\/www.libf.ac.uk\/professional-qualifications\/trade-and-transaction-banking\/certificate-for-documentary-credit-specialists-cdcs\/?utm_source=TFG+-+CDCS&amp;utm_medium=MPU+banner&amp;utm_campaign=TFG+-+CDCS+campaign\" target=\"_blank\" rel=\"noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"1024\" src=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-1024x1024.gif\" alt=\"\" class=\"wp-image-126577\" style=\"width:256px;height:256px\" srcset=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-1024x1024.gif 1024w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-300x300.gif 300w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-150x150.gif 150w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-768x768.gif 768w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-320x320.gif 320w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-370x370.gif 370w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-414x414.gif 414w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-200x200.gif 200w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-250x250.gif 250w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-162x162.gif 162w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-159x159.gif 159w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-123x123.gif 123w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/CDCS-MPU-190x190.gif 190w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<p>ADVERTISEMENT<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-contents\">Contents<\/h2>\n\n\n<div class=\"block-table-content h-auto bg-white auto\">\n    <ul class=\"table-content\"><\/ul><\/div><\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:66.66%\">\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"ch4-types-credit\">Types of Credit<\/h2>\n\n\n\n<p class=\"bg-tale rounded p-24\" id=\"bg-tale-rounded-p-24\" style=\"font-size:16px\">There are several types of documentary credits, each with its own characteristics.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Sight Credits<\/h2>\n\n\n\n<p id=\"bg-tale-rounded-p-24\" style=\"font-size:16px\">With sight credits,&nbsp;<em>the nominated bank (<\/em>acting on its nomination),&nbsp;<em>the confirming bank<\/em>, or&nbsp;<em>the issuing bank<\/em>&nbsp;effects payment upon presentation of the documents (also called \u201cat sight\u201d), provided documents comply with the terms and conditions of the documentary credit.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Usance Credits<\/h2>\n\n\n\n<p id=\"bg-tale-rounded-p-24\" style=\"font-size:16px\">Under usance credits,&nbsp;<em>the issuing bank<\/em>&nbsp;undertakes to honour a compliant presentation at&nbsp;<em>a future date<\/em>&nbsp;(known as the \u201cmaturity date\u201d). There are two types of usance credits:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li style=\"font-size:16px\"><strong>Acceptance credits<\/strong>: A documentary credit stipulating the presentation of a bill of exchange (\u201cdraft\u201d) which the bank will accept and pay at maturity to&nbsp;<em>the beneficiary<\/em>.<\/li>\n\n\n\n<li style=\"font-size:16px\"><strong>Deferred payment credits<\/strong>: Same as&nbsp;<em>acceptance credits<\/em>, except that they do not require the presentation of a draft.<\/li>\n<\/ol>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Mixed Payment Credits<\/h2>\n\n\n\n<p id=\"bg-tale-rounded-p-24\" style=\"font-size:16px\">Practitioners use mixed payment credits when a partial amount is payable at sight while the remainder is payable at a future date (or dates) as per the documentary credit terms.<\/p>\n\n\n\n<p style=\"font-size:16px\">Since these credits comprise a mix of sight and usance credits, they are known as mixed payment credits.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Negotiation Credits<\/h2>\n\n\n\n<p style=\"font-size:16px\">A negotiation credit is the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and\/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Confirmed Credits<\/h2>\n\n\n\n<p style=\"font-size:16px\">Confirmed credits are those that also bear&nbsp;<em>the confirming bank\u2019s<\/em>&nbsp;irrevocable undertaking (in addition to that of&nbsp;<em>the issuing bank)<\/em>&nbsp;to honour or negotiate, without recourse, documents complying with the terms and conditions of the credit.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Transferable credits<\/h3>\n\n\n\n<p style=\"font-size:16px\">If&nbsp;<em>the beneficiary<\/em>&nbsp;(i.e., the \u201cfirst beneficiary\u201d) of a documentary credit is an intermediary trader that procures the goods from another source, they may request the buyer to provide a transferable credit, which the first beneficiary can then transfer to its supplier (i.e., the \u201csecond beneficiary\u201d). A transferable documentary credit must expressly state that it is transferable and provide the name of the nominated bank or the bank authorised to transfer.<\/p>\n\n\n\n<p style=\"font-size:16px\">To transfer the credit,&nbsp;<em>the first beneficiary<\/em>&nbsp;will request that&nbsp;<em>the nominated&nbsp;<\/em>or&nbsp;<em>authorised bank<\/em>&nbsp;transfer the documentary credit to&nbsp;<em>the second beneficiary<\/em>&nbsp;in whole or in part.&nbsp;<em>The first beneficiary<\/em>&nbsp;can request transfer to multiple&nbsp;<em>second beneficiaries,<\/em>&nbsp;provided the documentary credit allows for partial shipments. However,&nbsp;<em>the second beneficiary<\/em>&nbsp;cannot transfer the documentary credit to another subsequent beneficiary.<\/p>\n\n\n\n<p style=\"font-size:16px\">Under UCP 600, the transfer must be effected on the existing terms and conditions except for the amount, the unit price if given, the expiry date, and the latest date of shipment or period for presentation, all of which can be reduced. Furthermore, the name of&nbsp;<em>the first beneficiary<\/em>&nbsp;can be substituted with&nbsp;<em>the applicant\u2019s<\/em>. If the documentary credit requires the presentation of an insurance document, the amount or the percentage of insurance can be increased to provide cover as initially required under the documentary credit.<\/p>\n\n\n\n<p style=\"font-size:16px\"><em>The first beneficiary<\/em>&nbsp;has the right to provide its invoice in substitution of&nbsp;<em>the second beneficiary\u2019s invoice&nbsp;<\/em>and draw for the difference in amount, if any. However, if it fails to provide its invoice,&nbsp;<em>the transferring bank<\/em>&nbsp;can forward documents received from&nbsp;<em>the second beneficiary<\/em>&nbsp;to&nbsp;<em>the issuing bank<\/em>.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Back-to-back Credits<\/h2>\n\n\n\n<p style=\"font-size:16px\">Back-to-back documentary credits serve the same purpose as transferable credits. However, instead of transferring the original documentary credit to its supplier,&nbsp;<em>the beneficiary<\/em>&nbsp;requests that its bank issue a new one in favour of its supplier. Practitioners call these back-to-back credits, as banks issue them on the back of an original documentary credit.<\/p>\n\n\n\n<p style=\"font-size:16px\">A back-to-back credit is separate and independent from the original documentary credit. While&nbsp;<em>the issuing bank<\/em>&nbsp;of the back-to-back documentary credit must honour a complying presentation received under its documentary credit, the payment under the original is contingent on the ability of&nbsp;<em>the beneficiary&nbsp;<\/em>of the original documentary credit to provide documents in compliance with the terms and conditions.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Instalment Credits<\/h2>\n\n\n\n<p style=\"font-size:16px\">Instalment credits stipulate a shipment schedule with specific quantities or dates by which the goods will be shipped.<\/p>\n\n\n\n<p style=\"font-size:16px\">A unique feature of these credits is that if one instalment is not shipped within the stipulated period, the entire credit is no longer available for any subsequent instalments (not just for that specific instalment).<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Revolving Credits<\/h2>\n\n\n\n<p style=\"font-size:16px\">When buyers place repeat orders with the same sellers for the same goods at the same price and with the same terms and conditions, instead of issuing a new credit every time, they can agree with their suppliers to issue revolving credits.<\/p>\n\n\n\n<p style=\"font-size:16px\">These credits are \u2018revolved\u2019 \u2013 either automatically or through a notice of reinstatement from&nbsp;<em>the issuing bank<\/em>&nbsp;\u2013 under the terms and conditions of the existing drawing.<\/p>\n\n\n\n<p style=\"font-size:16px\">The parties can agree to stipulate the number of times, the maximum amount, or the latest date up to which a revolving credit will automatically be reinstated.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Advance Payment Credits<\/h2>\n\n\n\n<p style=\"font-size:16px\">Typically, documentary credits provide payments to&nbsp;<em>the beneficiary<\/em>&nbsp;at the post-shipment stage upon presentation of documents complying with the terms and conditions. However, it is possible to provide advance payment to&nbsp;<em>the beneficiary<\/em>&nbsp;at the pre-shipment stage in anticipation of&nbsp;<em>the beneficiary<\/em>&nbsp;presenting documents after shipping the goods.<\/p>\n\n\n\n<p style=\"font-size:16px\">To accomplish this, the credit allows the beneficiary to draw for up to a specified amount by simply presenting a receipt. The amount of any advance payment must then be deducted from invoice amounts as goods are shipped.<\/p>\n\n\n\n<p style=\"font-size:16px\">Financiers can provide pre-shipment finance through two types of advance payment credits:<\/p>\n\n\n\n<p style=\"font-size:16px\">1. <strong>Red clause documentary credits<\/strong>: These credits contain a clause authorising\u00a0<em>the nominated bank<\/em>\u00a0to extend an advance payment to\u00a0<em>the beneficiary.\u00a0<\/em>\u00a0The bank can release a set value at the pre-shipment stage to help\u00a0<em>the beneficiary<\/em>\u00a0procure the raw material, process, manufacture, pack, and export the goods. The advance payment is settled later by the submission of credit-compliant documents by the beneficiary covering the relevant shipment of goods.<\/p>\n\n\n\n<p style=\"font-size:16px\">Banks historically typed this clause in red ink when credits were issued in letter form.<\/p>\n\n\n\n<p style=\"font-size:16px\">2. <strong>Green clause documentary credits<\/strong>: These credits are similar to red clause documentary credits. However, in addition to extending advance payment to\u00a0<em>the beneficiary<\/em>\u00a0at the pre-shipment stage, green clause documentary credits also include additional coverage of pre-shipment warehousing and insurance costs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Standby Letters of Credit<\/h2>\n\n\n\n<p style=\"font-size:16px\">Standby letters of credit (SBLCs) are used for a variety of purposes, such as to support an applicant\u2019s performance obligations (performance standby), to support an applicant\u2019s bid in a tender (bid-bond standby), to guarantee an applicant\u2019s financial obligations to the beneficiary, which can also be a bank (financial standby), or to guarantee the performance of a commercial contract (advance payment guarantee).<\/p>\n\n\n\n<p style=\"font-size:16px\">Practitioners also use SBLCs to support open account transactions where a seller ships the goods directly to the buyer, and the buyer is expected to make the payment directly to the seller. If the buyer fails to pay when due, the beneficiary can draw on the SBLC.<\/p>\n\n\n\n<p style=\"font-size:16px\">Generally, standby credits are not expected to be drawn on, hence the name. SBLCs are akin to guarantees since, in the case of the applicant\u2019s default or non-fulfilment of its contractual obligations, the beneficiary of an SBLC can draw under the SBLC by claiming on&nbsp;<em>the issuing bank&nbsp;<\/em>or&nbsp;<em>the confirming bank<\/em>&nbsp;as per the terms and conditions of the SBLC.<\/p>\n\n\n\n<p style=\"font-size:16px\">Typically,&nbsp;<em>the beneficiary\u2019s<\/em>&nbsp;claim must be supported by documents such as its statement confirming the applicant\u2019s default, copies of unpaid invoices, or copies of transport documents as required in the SBLC.<\/p>\n\n\n\n<p style=\"font-size:16px\">Although many documentary credits are often issued subject to UCP 600, UCP 600 has limited applicability to SBLCs as not all articles of UCP 600 apply to SBLCs. The International Standby Practices of 1998 (\u201cISP98\u201d) (ICC publication no 590) provides a separate and exclusive set of rules governing SBLCs issued subject to ISP98.<\/p>\n\n\n\n<p><\/p>\n\n\n<\/div>\n<\/div>\n\n\n<section class=\"full-width block-slider_with_text py-10\" data-block=\"slider_with_text\" data-theme=\"dark\">\n  <div class=\"container overflow-hidden\">\n    <div class=\"slider-text-block\">\n      <div class=\"slider-text-block-container\">\n        <h2 id=\"heading-explore-our-financing-solutions\" class=\"elipsise-2-line word-wrap not-for-table-content\">\n          Explore our financing solutions        <\/h2>\n        <span class=\"block-subtitle elipsise-2-line word-wrap\">How TFG are helping to finance tomorrow&#8217;s trade<\/span>\n                  <a href=\"\/get-trade-finance\/\" class=\"button-standart button-standart-blue\">\n            <span>Find out more<\/span>\n          <\/a>\n              <\/div>\n    <\/div>\n    <div 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src=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Soft-commodities-trader-\u2013-A-case-study2.jpg\" class=\"attachment-large size-large wp-post-image\" alt=\"\" srcset=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Soft-commodities-trader-\u2013-A-case-study2.jpg 869w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Soft-commodities-trader-\u2013-A-case-study2-300x122.jpg 300w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Soft-commodities-trader-\u2013-A-case-study2-768x311.jpg 768w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Soft-commodities-trader-\u2013-A-case-study2-320x130.jpg 320w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Soft-commodities-trader-\u2013-A-case-study2-370x150.jpg 370w, https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Soft-commodities-trader-\u2013-A-case-study2-414x168.jpg 414w, 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       <\/div>\n                <div class=\"post-title\">\n                  <h4>\n                    <a href=\"https:\/\/www.tradefinanceglobal.com\/case-studies\/energy-trading-group\/\" rel=\"bookmark\" class=\"elipsise-2-line\">\n                      Energy trading group &#8211; A case study                    <\/a>\n                  <\/h4>\n                <\/div>\n              <\/div>\n                              <div class=\"post-image\">\n                  <a href=\"https:\/\/www.tradefinanceglobal.com\/case-studies\/energy-trading-group\/\" rel=\"bookmark\">\n                    <img loading=\"lazy\" decoding=\"async\" width=\"869\" height=\"352\" src=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Energy-trading-group-\u2013-A-case-study2.jpg\" class=\"attachment-large size-large wp-post-image\" alt=\"\" srcset=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/08\/Energy-trading-group-\u2013-A-case-study2.jpg 869w, 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href=\"https:\/\/www.tradefinanceglobal.com\/case-studies\/hardware-distribution-company-ecommerce\/\" rel=\"bookmark\" class=\"elipsise-2-line\">\n                      Hardware distribution company in e-commerce &#8211; A case study                    <\/a>\n                  <\/h4>\n                <\/div>\n              <\/div>\n                              <div class=\"post-image\">\n                  <a href=\"https:\/\/www.tradefinanceglobal.com\/case-studies\/hardware-distribution-company-ecommerce\/\" rel=\"bookmark\">\n                    <img loading=\"lazy\" decoding=\"async\" width=\"869\" height=\"352\" src=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/Hardware-distribution-company-in-e-commerce-\u2013-A-case-study.jpg\" class=\"attachment-large size-large wp-post-image\" alt=\"\" srcset=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/07\/Hardware-distribution-company-in-e-commerce-\u2013-A-case-study.jpg 869w, 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Sight Credits With sight credits,&nbsp;the nominated bank (acting on its nomination),&nbsp;the confirming bank, or&nbsp;the issuing\u2026 <a href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/\" class=\"read-more-link\">read more &rarr;<\/a><\/p>\n","protected":false},"author":84,"featured_media":110506,"parent":10611,"menu_order":2,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"content-type":"","ep_exclude_from_search":false,"footnotes":""},"categories":[2129],"class_list":["post-99909","page","type-page","status-publish","has-post-thumbnail","hentry","category-letters-of-credit"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.7 (Yoast SEO v24.7) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Types of credit | TFG Ultimate Guide<\/title>\n<meta name=\"description\" content=\"[UPDATED 2025]There are several types of documentary credits, each with its own characteristics.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Types of Credit\" \/>\n<meta property=\"og:description\" content=\"[UPDATED 2025]There are several types of documentary credits, each with its own characteristics.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/\" \/>\n<meta property=\"og:site_name\" content=\"Trade Finance Global\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/tradefinanceglobal\" \/>\n<meta property=\"article:modified_time\" content=\"2025-01-29T13:08:21+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"869\" \/>\n\t<meta property=\"og:image:height\" content=\"352\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@tradefinglobal\" \/>\n<meta name=\"twitter:label1\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/\",\"url\":\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/\",\"name\":\"Types of credit | TFG Ultimate Guide\",\"isPartOf\":{\"@id\":\"https:\/\/www.tradefinanceglobal.com\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit.jpg\",\"datePublished\":\"2024-03-07T19:41:55+00:00\",\"dateModified\":\"2025-01-29T13:08:21+00:00\",\"description\":\"[UPDATED 2025]There are several types of documentary credits, each with its own characteristics.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/#breadcrumb\"},\"inLanguage\":\"en-GB\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-GB\",\"@id\":\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/#primaryimage\",\"url\":\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit.jpg\",\"contentUrl\":\"https:\/\/www.tradefinanceglobal.com\/wp-content\/uploads\/2024\/05\/Types-of-Credit.jpg\",\"width\":869,\"height\":352},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/types-of-credit\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.tradefinanceglobal.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Introduction to Letters of Credit | 2024 Guide\",\"item\":\"https:\/\/www.tradefinanceglobal.com\/letters-of-credit\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Types of Credit\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.tradefinanceglobal.com\/#website\",\"url\":\"https:\/\/www.tradefinanceglobal.com\/\",\"name\":\"Trade Finance Global\",\"description\":\"Transforming Trade, Treasury &amp; 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