If you are running an international business, you may be aware of what a letter of credit is. It is a legal document that is issued by a bank or a private financial institution to the exporter on behalf of the importer guaranteeing that the amount of LC agreement will be paid on-time. And if the importer is unable to do so, it will be covered by the issuing bank. In short, here the bank acts as a financial guarantor for the importer and ensures the exporters the amount for their delivered goods and services. But when it comes to the types of letters of credit, you often get confused between confirmed and unconfirmed LC.

In this blog, you will get to know what is confirmed LC and how confirm letters of credit are different from unconfirmed LC. Keep reading to know:

What Is A Confirmed Letter Of Credit?

A confirmed LC is a Bank Credit Letter where the payment guarantee of the seller or exporter is backed up by a second bank or a confirming bank. In simple words, in case if the first bank defaults to pay, or a seller isn't satisfied with the creditworthiness of the first bank, he may require a confirmed irrevocable letter of credit, so that the payment will be covered by the second bank. This type of trade finance payment method contains an LC confirmation and is used by importers and exporters in international trade where an additional guarantee is provided to the original LC from a second bank. The borrowers are required to apply for the confirmed LC if the seller is not convinced about the assured payment.

If there is a confirmed LC at sight that has been issued in favor of the exporter, then the exporter will be paid at sight to the exporter. To simplify confirmed lc meaning, a confirm LC is a letter of credit where the seller has a payment guarantee from a second bank or a confirming bank. 

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