Difference between Letter of credit and Bank Guarantee Posted on 10 April 2023 Category : For Beginners The information provided here is part of Import Export Training online Difference between Letter of credit and Bank Guarantee What is the difference between BG and LC? How does Letter credit work and how LC differs from Bank guarantee. 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. Under an LC, the seller gets guarantee on payment of his sale of goods from the buyer’s bank. I request readers to go through my different articles in detail in this website, already explained. What is a bank guarantee and how does BG work? 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. How to differentiate a Letter of Credit and a Bank guarantee? As per Letter of Credit, once the obligation on production of documents on fulfillment of contract, the bank pays amount to beneficiary. However, in a bank guarantee, the beneficiary is paid on non fulfillment of obligation as per contract of BG. You can also read more information by clicking Letter of credit - How does LC work? What are the advantages of Letter of Credit to Exporter? How LC is benefited to Importer? Are there any disadvantages to importer for a consignment under Letter of Credit? What are the disadvantages of LC to an exporter? Who are the parties involved in Letter of Credit? How to check authenticity of LC? What is Prime Banker? Yes, I am sure, once after going through that articles you will have a good knowledge about Letter of Credit. Do you have different opinion about the difference between Letter of Credit and Bank Guarantee? Please share your thought on Bank Guarantee Vs Letter of Credit. The above information is a part of Export Import Training online Posts about international trade cauching Spelling error in LC? Is wrong spelling a discrepancy under Letter of credit. Difference between Purchase Order and Pro forma Invoice Is Letter of Credit LC safe for an Importer? Is Letter of Credit (LC) a safe mode of payment for an Exporter? How Letter of Credit (LC) works When does overseas buyer prepare Purchase order or Letter of Credit. How to start Export Business? How to get Export Orders? What are the risks and solutions in Export Business? Click here to know India Trade Classification(ITC) Click here to know HS code of other product/commodity Service Tax - Click here to read complete notification under Budget 2014 What is Bank post shipment credit to exporters? Why does Palletization require? Why labeling and marking in Export business? How to make DA mode of payment safe Transferability of Bill of Lading Transhipment - A redefinition Travelers to India under import duty exemption, Frequently Asked Questions Part 2 Triangular export Triangular shipment Types of Insurance Documents. How to make delay in delivery of Shipment? How to minimize import cargo clearance time? An open logic proposal to WTO How to obtain a duplicate BL, if original bill of lading lost. Transferability of Bill of Lading Transhipment - A redefinition Travelers to India under import duty exemption, Frequently Asked Questions Part 2 Triangular export Triangular shipment Comments Malay Pota: On 29 April 2014 The difference between LC and bank Guarantee can be stated in one sentence as under: In LC the payment is made to the beneficiary of LC only on fulfillment of the condition of LC whereas in BG the payment is made to the beneficiary of BG if the condition of BG are breached. See in all cases BG is not issued by Bank like Corporate Guarantee (CG)is issued by Corporate entity. Malay Bapi: On 14 September 2014 In a very simple way, in the case of LC, the bank acts as direct agent between the importer and exporter to pay to the beneficiary immediately after fulfillment of the conditions in LC. Whereas in BG, bank's involvement only arise when there is default of agreement / breach of fulfilment of conditions by the importer. Joseph: On 02 October 2014 Can some help me with how this could be done,if applicable? is it possible for me to deman a BG from a bank in the USA because his representative office in Asia requested me to make deposit into the USA bank account? for example, citi bank in Asia requested me to make deposit into a beneficiary account with citi bank USA, is it proper or possible for the me to request for BG from the bank in the USA,that my deposit will be reimburse to me at when due. or the BG will come from the citi bank in Asia? Ali Hammad : On 12 February 2015 I've read your article regarding the difference between LC and Bank guarantee, where its written that the bank guarantee is the commercial instrument. so i want to know and you are requested to tell me what is the difference between Financial Instrument and Commercial Instruments ? Renan L Vicentini: On 18 February 2015 I have a question that Iwould greatly appreciate if you could help me with. A customer in China which we are offering soybeans from Brazil told me this morning that they would like to pay by a '90 day L/C at sight' , and that would be beneficial to the seller as well - that the seller could cash it as if it were a regular L/C at sight.Since I have never heard about such a method, would you be so kind as to let me know if this, in fact, exists, and if this really means the seller can cash it as if it were as a regular L/C at sight ?? selina : On 21 October 2015 Dear sir, What is the difference between Letter of Credit & Contract ? Both are payment term, am I right? what is Contract? We recently handled a shipment. Atfirst buyer agreed to do the payment in CONTRACT. Commercial Invoice issued with Contract number & date. But later, about after 1 month when the cargo is arriving at destination buyer issued Letter of Credit. Buyer said they will not payment by Contract. Revised commercial invoice issued with L/C number & date removing Contract number & date. Thanks selina srujan: On 09 January 2016 hello,i want to know the difference between performing guarantee and financial guarantee. shanawaz: On 18 February 2016 I need a entire knowledge of exports and re-exports with all the documents from a to z plz Sylvia Sbyram : On 20 April 2016 what are the steps and requirements for BG/SBLC and Non Recourse Loan in the UK. Please advise. Lopsang Sherpa: On 21 July 2016 Dear Sir/Ma We have project funder with cutting edge and group capital fund who can finance your signatory projects and help you to enhance your business plan. Our provider's financial instrument can be used for purchase of good from any manufacturer irrespective of location. We are mandate to providers who specialized in BG, SBLC MTN, CD, Non collateral loan, confirmable Bank Draft and other financial assistance from AAA rated bank (Prime Bank). The financial instrument can be invested into High Yield Trading Program or Private Placement Programme (PPP). Contact via email or phone for more information and procedures. Lopsang Sherpa Email: lascapital.investments@gmail.com Skype ID: lascapital.investments Lopsang Sherpa: On 21 July 2016 I am a direct Mandate to a genuinely renowned Investment Finance Company offering Cash & Asset Backed Financial Instruments on Lease. lascapital.investments at gmail dot com Skype: lascapital.investments Lopsang Sherpa: On 30 July 2016 Dear Sir/Ma We have project funder with cutting edge and group capital fund who can finance your signatory projects and help you to enhance your business plan. Our provider's financial instrument can be used for purchase of good from any manufacturer irrespective of location. We are mandate to providers who specialized in BG, SBLC MTN, CD, Non collateral loan, confirmable Bank Draft and other financial assistance from AAA rated bank (Prime Bank). The financial instrument can be invested into High Yield Trading Program or Private Placement Programme (PPP). Contact via email or phone for more information and procedures. Lopsang Sherpa Email: lascapital.investments@gmail.com Skype ID: lascapital.investments Robert Francis: On 03 August 2016 Dear Sir, We are direct providers of Fresh Cut BG, SBLC and MTN which are specifically for lease/purchase, our bank instrument can be engage in PPP Trading, Discounting, signature project(s) such as Aviation, Agriculture, Petroleum, Telecommunication, construction of Dams, Bridges, Real Estate and all kind of projects. We do not have any broker chain in our offer or get involved in chauffeur driven offers. We deliver with time and precision as sethforth in the agreement. Our terms and Conditions are reasonable, below is our instrument description. The procedure is very simple; the instrument will be reserved on euro clear to be verified by your bank, after verification an arrangement will be made for necessary bank documents and stock testing expenses, the cost of the Bank Guarantee will be paid after the delivery of the MT760, Description OF INSTRUMENTS: 1. Instrument: Bank Guarantee (BG/SBLC) 2. Total Face Value: Eur/USD 5M MIN and Eur/USD 10B MAX (Ten Billion EURO/USD). 3. Issuing Bank: HSBC Bank London, Credit Suisse and Deutsche Bank Frankfurt. 4. Age: One Year, One Month 5. Leasing Price: 6% of Face Value plus 2% commission fees to brokers. 6. Delivery: Bank to Bank swift. 7. Payment: MT-103 or MT760 8. Hard Copy: Bonded Courier within 7 banking days. We are ready to close leasing/purchasing with any interested client in few banking days, if interested do not hesitate to contact me.(WE MOVE FIRST) Regards Robert Francis Skype : robfrancis7 JAN JACOB: On 18 August 2016 Dear Sir/Ma I write to introduce our financial services to you. I am a direct mandate to a Financial Institution who is also known as private lender specialized in the Lease of Bank / Financial Instruments in the form of Bank Guarantees (BG), Standby Letter of Credit (SBLC), Documentary Letter of Credit (DLC), Letter of Credit (LC), Performance Bonds (PB), Medium Term Notes (MTN) et al with funds is purely earned from private and corporate investment portfolios without criminal origin. We offer these from a genuine and certifiable finance company as the provider hence we are able finance your signatory projects and help you enhance your business plan. Furthermore, our financial instrument can be used for the purchase of goods from any manufacturer irrespective of their location. It can also serve as collateral with any bank in the world to secure loans for your project or to activate credit line to finance your business plan. Our financial instrument can be invested into High Yield Investment Trading Program {HYITP) or Private Placement Program (PPP). All bank instruments are for lease from a genuine and reliable source without broker chain / joker broker story or chauffer driven offer while having your required time frame in mind. We specialized in Bank Guarantee {BG}, Standby Letter of Credit {SBLC}, Medium Term Notes {MTN}, Confirmable Bank Draft {CBD} as well as other financial instruments issued from AAA Rated bank such as HSBC Bank Hong Kong, HSBC Bank London, Deutsche Bank AG Frankfurt, Barclays Bank , Standard Chartered Bank and others on lease at the lowest available rates depending on the face value of the instrument needed. We will be glad to share our working procedures with you upon request to help us proceed towards closing deals effectively. For further inquiry contact E-mail: bgjan.farnholt@gmail.com Skype ID: bgjan.farnholt Mr Henry: On 20 January 2017 We are interesting on your Financial Services,We provide Loans, Discounting,Project Funding,Letter of credit, and lots more for investors,contact us via kim sungnyon: On 26 April 2017 Dear Partner/Associate, I am a direct Mandate to a genuinely renowned Investment Finance Company offering Cash & Asset Backed Financial Instruments such as BG/SBLC/LC/DLC on Lease and Sale at the best rates and with the most feasible procedures. Instruments offered can be put in all forms of trade and can be monetized or discounted for direct funding. We offer certifiable and verifiable bank instruments via Swift Transmission from a genuine provider capable of taking up time bound transactions. Kindly contact for genuine inquiries and I can provide you with the needed information. Email: sungnyon.bgsblc@gmail.com Skype: kim.sungnyon Best Regards ramana: On 03 May 2017 Sir/Ma, We have in place a client friendly offer for delivery of bank instrument to our clients. We charge low fees and provider deliver with precision. All options are left open in discussion to assist in successful completion of transaction. kindly contact for genuine inquiries thus you can be furnished with the needed information and for further discussions. E-mail:kalram.lease@gmail.com Skype ID:kalram.lease Regards A.Fouad AlBringi: On 09 May 2017 We ar albringi for trade and industry Co.,Mr. A.Fouad AlBringi , we interested lease SBLC/ MT 760 , amount up 250000000- 500Million Euro , please provide us your procedures , and we looking meet you in your office , we hope hear you ASAP. Best Regards. A.Fouad AlBringi danush: On 28 November 2017 I cant understand any thing kim sungnyon: On 21 December 2017 Am direct to a genuine provider for BG/SBLC specifically for lease,at leasing price of 3% + 0.5%+X% of face value,Issuance by HSBC London/Hong Kong or any other Bank in Europe,Middle East or USA. Contact : Mr. Kim Sungnyon Skype ID: kim.sungnyon Email : sungnyon.bgsblc@gmail.com All inquires should include the following minimum information so I can quickly address your needs: Complete contact information: What exactly do you need? How long do you need it for? Are you a principal borrower or a broker? U K NONDI: On 14 March 2018 Dear Sir As per my Business , i need some information. Are you give Financial Support ? What type ? We are international financial consultant. Mr Akhtar Hossain is in USA. and Uttam Nondi take care in Bangladesh. we support our client as bellow: At sight LC, Usance DLC, SBLC, BG, POF Messages, Funding ETC. If you give us this type of support. Please be clear your processing , Bank List , Fees and others details. Thanks & Be-regards Nondi ali: On 05 July 2022 We want to open LC to buy sewing machines and sweaters from China for 6 months We pledge to pay within 6 months We will give you any guarantee you see suitable for you to open LC We will pay any fees we to open the LC thanks for cooperation