LetterAgent
Mail physical letters by just asking your AI assistant.
Home > Guides > Letter of credit
A letter of credit is a bank's written promise to pay a seller once the seller presents specified shipping and sale documents, so the seller does not have to trust the buyer's word alone. It is a banking instrument, not an ordinary business letter, and it is issued by a bank at the buyer's request.
| Party | Role |
|---|---|
| Buyer (applicant) | Asks their bank to issue the letter of credit |
| Issuing bank | Promises payment if the documents match the terms exactly |
| Seller (beneficiary) | Ships the goods, then presents documents to claim payment |
| Advising bank | Passes the letter of credit to the seller, often in the seller's country |
Picture a buyer in one country ordering goods from a seller in another. The seller worries the buyer will not pay after the goods ship. The buyer worries about paying before the goods arrive. A letter of credit splits that risk: the seller gets paid by a bank, not by the buyer directly, once the paperwork proves shipment happened as agreed. Banks deal in documents, not in goods, which is the key idea. The bank checks that the presented papers match the letter's terms word for word. It does not inspect the cargo or judge its quality.
A letter of intent says two parties plan to do a deal and sketches the terms. It is often non-binding. A letter of credit is a binding payment undertaking by a bank, with a fixed amount, an expiry date, and a precise list of required documents. Confusing the two is a real and costly error: a letter of intent will not get a seller paid, and a letter of credit will not be treated as a casual outline. The documents typically required include a commercial invoice, a bill of lading or transport document, and sometimes inspection or insurance certificates.
Because the whole system turns on original documents. In the classic paper flow, the issuing bank sends the letter of credit to the advising bank, which hands the original to the seller. The seller then presents original shipping documents before the expiry date. A single mismatch, a misspelled port name, a date past the deadline, a missing certificate, can let the bank refuse payment, even if the goods themselves are fine. That strictness is deliberate: it is what makes the bank's promise credible. Electronic letters of credit exist, but paper originals remain common in trade finance, and many banks still insist on them for high-value shipments.
Two distinctions matter most. A revocable letter of credit can be changed or cancelled without the seller's agreement, which makes it weak protection; almost all trade letters of credit today are irrevocable, meaning changes need all parties to agree. A confirmed letter of credit adds a second bank's payment promise on top of the issuing bank's, which helps when the seller doubts the issuing bank or its country. Unconfirmed letters rely on the issuing bank alone. Other variants set payment timing: a sight letter pays when documents are presented, while a deferred payment letter pays at a later agreed date.
LetterAgent cannot issue a letter of credit, because only a bank can make that payment promise. What LetterAgent can do is mail ordinary business correspondence about a transaction, such as a cover letter to a bank or a seller, to a US or Canadian address, printed on standard 8.5 by 11 inch paper in a double-window envelope. The letter of credit itself must come from the issuing bank through banking channels, usually as a bank original, not as a printout from a mailing service. Never treat a mailed copy as the instrument itself unless your bank tells you otherwise.
Ready to mail it? Send your letter with LetterAgent: describe it to your AI assistant, approve the exact quoted price, and it is printed and mailed.
LetterAgent is a working name. Prices include print, postage, and our service fee. US prices in USD, Canadian prices in CAD (Canadian prices exclude applicable sales tax, added at checkout). Currently in private testing.
Need help? Ask your assistant: it can check a job's status any time. If it ever can't handle something: hello@getletteragent.com