1. Letters of credit ensure that a transaction proceeds as planned, while bank guarantees reduce the loss if the transaction doesn't go as planned.
2. LCs are frequently used in international transactions compared with bank guarantees.
3. bank guarantees are often used in real estate and infrastructure development to mitigate credit risks.
4. A bank guarantee is a commercial instrument guaranteeing by bank to a party (parties) on behalf of his customer, assuring the beneficiary to effect payment on default of obligation.
5. A letter of credit is written commitment document issued by a bank or other financial institutions to assure payment to seller on the basis of documentary proof on fulfillment of performance by seller as per terms and conditions mentioned in LC.
6. Risk
Letter Of Credit:
Less for merchant and more for bank.
Bank guarantees:
More for merchant and less for bank.
7. Parties Involved
Letter Of Credit:
5 or more
Bank guarantees:
3
2. LCs are frequently used in international transactions compared with bank guarantees.
3. bank guarantees are often used in real estate and infrastructure development to mitigate credit risks.
4. A bank guarantee is a commercial instrument guaranteeing by bank to a party (parties) on behalf of his customer, assuring the beneficiary to effect payment on default of obligation.
5. A letter of credit is written commitment document issued by a bank or other financial institutions to assure payment to seller on the basis of documentary proof on fulfillment of performance by seller as per terms and conditions mentioned in LC.
6. Risk
Letter Of Credit:
Less for merchant and more for bank.
Bank guarantees:
More for merchant and less for bank.
7. Parties Involved
Letter Of Credit:
5 or more
Bank guarantees:
3
