Bill of Exchange - a document used in international trade to pay for goods or services. It is signed by the person promising to pay. The bill of exchange may be payable on demand or at a point in time in the future.
A bill of exchange may be transferable and is similar to a promissory note.
Letter of Credit - this is a letter from a bank guaranteeing the buyers payment will be honored as per the relevant contract. In the event the buyer is not able to make the relevant payment, the bank will be required to pay the remaining outstanding amount due.
In international trade, parties may not know each other and a letter of credit can provide the necessary comfort to the seller that it will receive prompt payment.
Letters of credit are typically negotiable which means they can normally be freely transferable to third parties.
A bill of exchange may be transferable and is similar to a promissory note.
Letter of Credit - this is a letter from a bank guaranteeing the buyers payment will be honored as per the relevant contract. In the event the buyer is not able to make the relevant payment, the bank will be required to pay the remaining outstanding amount due.
In international trade, parties may not know each other and a letter of credit can provide the necessary comfort to the seller that it will receive prompt payment.
Letters of credit are typically negotiable which means they can normally be freely transferable to third parties.
