When does a Letter of Credit make sense for your export business?

Expanding into a new international market can be exciting, but it often comes with a fair bit of financial uncertainty. If you’re an exporter, getting paid on time (or at all) is non-negotiable. You’ve shipped the goods, followed the contract, and now the final step – payment – needs to happen smoothly.
 

But what if your buyer is unfamiliar, the market is considered risky, or you've been stung before by late or missing payments? This is where a Letter of Credit (LC) can be a useful tool to consider.
 

Letters of Credit have been a trusted document in international trade for decades, and for good reason. They offer exporters a level of protection and certainty, particularly when trust is still being built or cash flow needs to be predictable. Yet many businesses may not be aware of them or don’t realise just how versatile and accessible they can be.

So, when should you consider one?

5 times a Letter of Credit might be exactly what you need

1. You’re trading with a new customer in an unfamiliar market

Breaking into new regions is great for growth, but it also means entering the unknown. When there’s no trading history or established trust, a Letter of Credit can give you a level of peace of mind. The bank pays for the goods supplied if you meet the agreed conditions.

2. You’ve had payment issues in the past

If you've experienced delayed or disputed payments before, you’ll know how disruptive they can be, especially when you’ve already covered production and shipping costs. An LC reduces this risk, making the bank responsible for releasing funds once documents are correctly presented.

3. You’re exporting to countries where LCs are common, or even mandatory

In some markets (Bangladesh, parts of India or North Africa), LCs are not just common, they’re often a standard or legal requirement. If you're trading in these regions, it pays to be prepared and to have someone who understands the paperwork.

4. You’re dealing with long payment terms or large orders

If you’ve agreed to 60 or 90-day terms, a Letter of Credit can protect you during that long wait. It adds an extra layer of security for high-value shipments and helps keep your cash flow healthy, especially when you need to pay your suppliers or manufacturers.

5. Your buyer asks for one

Sometimes the request comes from the other side. A buyer may prefer or require an LC to show their bank that they’re managing risk. Either way, if an LC is part of the deal, having expert support to manage the process can save you time, cost, and a lot of stress.

Letters of Credit aren’t just for big corporates or complex deals; they’re a practical tool for any exporter looking for security, reliability, and smoother cash flow. Whether you’re stepping into a new market, dealing with tight margins, or want to reduce the risk of non-payment, an LC can help keep your business moving.

If you're not sure whether a Letter of Credit is right for you, or you're already using them and want to streamline the process, we’re here to help. Our team works with exporters every day to take the stress out of international payments — so you can focus on what you do best: growing your business.

For more information, contact our expert Letter of Credit team or take a look at the Letter of Credit services we provide.