General terminology
(the chart refers to material of BINETIX LLC for Risk management in Documentary operations published in 2014-2015)
Letters of Credit / LOC – also known as a Documentary credit, is a form of payment whereby a Bank irrevocably undertakes to pay a certain amount to a beneficiary against submission of documents, conditions and terms.
Collections – Bank Documentary collection is an order to the seller's bank to obtain payment of a fixed amount from the buyer against sending documents.
Bank Guarantees – A Bank guarantee is an irrevocable commitment of the bank to pay a certain amount, in accordance with pre-agreed terms, in case of non-performance of contractual obligations undertaken by a third party or upon occurrence of a negative risk event.
