Fully Funded Documentary Letter Of Credit - FFDLC

DEFINITION of 'Fully Funded Documentary Letter Of Credit - FFDLC'

A written promise of payment provided by a buyer to a seller that is guaranteed to clear by a particular bank. Once an FFDLC document is presented by the seller to the involved bank, the bank is obliged to remit full payment to the seller.

The seller may be required to fulfill certain conditions, such as providing proof of shipment of the goods sold to the buyer, before collecting payment from the bank. This method of payment provides assurance to the seller that the buyer has the necessary funds for the transaction and ready for remittance to the seller upon completion of the sale.

BREAKING DOWN 'Fully Funded Documentary Letter Of Credit - FFDLC'

This type of payment arrangement is typically useful in the context of international transactions. For example, an American consumer electronics distributor may be purchasing $500,000 worth of stereo equipment from a Chinese manufacturer. Since the two companies are so geographically distant from each other, each wants surety of the deal's completion before performing their part of it.

So, the seller can be assured the buyer has payment by receiving notice of an FFDLC, as the document proves that the buyer has transferred the $500,000 in cash to the bank involved, who then holds the funds for immediate release to the seller once the deal is complete and the FFDLC document is presented to the bank. Similarly, the buyer does not risk sending payment to the seller without knowing whether or not the goods have actually been shipped.

RELATED TERMS
  1. Purchase-Money Mortgage

    A mortgage issued to the borrower by the seller of the home as ...
  2. Seller

    1. An individual or entity that exchanges any type of good or ...
  3. Straight Credit

    A type of letter of credit. A straight credit can only be paid ...
  4. Settlement Agent

    1. The party involved in completing a transaction between a buyer ...
  5. Seller's Call

    An agreement between a buyer and a seller for a specific grade ...
  6. Buyer's Market

    A situation in which supply exceeds demand, giving purchasers ...
Related Articles
  1. Personal Finance

    The Ins And Outs Of Seller-Financed Real Estate Deals

    There's more than one way to buy or sell a house. Seller financing presents yet another unique option.
  2. Personal Finance

    Ins And Outs Of Seller-Financed Real Estate Deals

    Seller financing works like this: Instead of a buyer receiving a loan from a bank, the person selling the house lends the buyer the money for the purchase.
  3. Investing

    Letter of Credit

    A letter of credit is a document from a bank promising to pay the holder a certain amount if the holder fulfills certain obligations. Sellers in commercial transactions often require buyers to ...
  4. Personal Finance

    The Pros and Cons of Owner Financing

    Details on the upside and risks of this type of deal for both the owner and the buyer.
  5. Markets

    What's Trade Finance?

    Essentially, trade finance makes it possible and easy for exporters and importers to trade, and its expansion has accommodated a massive international trade growth.
  6. Personal Finance

    Rent-To-Own Homes: How The Process Works

    A rent-to-own agreement can benefit homebuyers with bad credit or insufficient funds for a down payment. Here’s how one works.
  7. Investing

    What is a Financial Market?

    “Financial market” is a broad term used to describe any forum where buyers and sellers meet to trade assets.
  8. Investing

    What's a Hire Purchase?

    Hire purchase is a term used in Great Britain to describe an installment plan payment arrangement.
  9. Personal Finance

    Rent-To-Own Real Estate Full Of Pitfalls

    Before you consider this type of arrangement, you should be aware of how it works, who benefits and the many things that can go wrong.
  10. Personal Finance

    When is a Down Payment Used?

    A down payment is an initial cash payment on an expensive good.
RELATED FAQS
  1. What's the difference between a letter of credit and a bank guarantee?

    Learn how letters of credit and bank guarantees differ, how they are used by banks and companies, and how buyers apply to ... Read Answer >>
  2. What is a bank's legal liability when issuing a letter of credit?

    Learn the responsibility of banks that issue letters of credit Letters of credits ensure payment on transactions between ... Read Answer >>
  3. What are the differences between Ex Works (EXW) and Free On Board (FOB)?

    Learn about Ex Works and Free on Board, the main difference between these Incoterms, and the responsibilities of buyers and ... Read Answer >>
  4. What's the difference between a bank guarantee and a letter of credit?

    A bank guarantee and a letter of credit are similar in many ways but they're two different things. Letters of credit ensure ... Read Answer >>
  5. How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock he or she doesn't technically own by borrowing ... Read Answer >>
  6. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center