Fully funded documentary letter of credit (FFDLC),
Definition of Fully funded documentary letter of credit (FFDLC):
Letters of credit are commonly used in commercial, international transactions. They allow a buyer to manage risks of international business dealings while also obtaining support through the promise of borrowed funds. A letter of credit is documented by a bank who serves as a third party in the transaction.
A fully funded documentary letter of credit (FFDLC) is a documented letter of credit that serves as a written promise of payment provided by a buyer to a seller. With a fully funded letter of credit, the buyer’s funds for the required payment are held in a separate account for use when needed, similar to the process for escrow. The seller receives payment when all of the terms of the agreement are fulfilled.
A written payment agreement a seller provides a buyer as proof that funds have been deposited with a specific bank. The seller can present the document to the bank for payment when all terms of the agreement have been fulfilled. Such terms may include presenting certain documents such as a BOL stamped by Customs as proof of shipment for goods. The conditions under which funds may revert to the buyer (e.g., sellers failure to provide a BOL within a set time period) are outlined in the letter of credit. Often used for international transactions when contract terms would be difficult to enforce.
How to use Fully funded documentary letter of credit (FFDLC) in a sentence?
- Businesses can use an FFDLC to obtain some or all of the funds moved to an escrow account for final payment.
- An FFDLC is a letter of credit backed by funds in escrow.
- Letters of credit can come in many different variations and may be either funded or unfunded.
Meaning of Fully funded documentary letter of credit (FFDLC) & Fully funded documentary letter of credit (FFDLC) Definition