Fully Funded Documentary Letter Of Credit - FFDLC

A A A

DEFINITION

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.

INVESTOPEDIA EXPLAINS

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. Transferable Letter Of Credit

    A letter of credit that permits the beneficiary of the letter to make some or ...
  2. Synthetic Letter Of Credit

    A letter of credit that has been pre-funded by the bank on the closing date, ...
  3. Irrevocable Letter Of Credit - ...

    Correspondence issued by a bank guaranteeing payment for goods and services ...
  4. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be ...
  5. Trade Finance

    The financing of international trade. Trade finance includes such activities ...
  6. Standby Letter of Credit - SLOC

    A guarantee of payment issued by a bank on behalf of a client that is used as ...
  7. Sight Letter Of Credit

    A letter of credit that is payable once it is presented along with the necessary ...
  8. Demand Guarantee

    A type of protection that one party in a transaction can impose on another party ...
  9. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor ...
  10. Interest Rate Index

    An index that is based on the interest rate of a financial instrument or basket ...
Related Articles
  1. Globalization: Progress Or Profiteering?
    Economics

    Globalization: Progress Or Profiteering?

  2. Different Needs, Different Loans
    Options & Futures

    Different Needs, Different Loans

  3. What's the difference between a bank ...
    Investing

    What's the difference between a bank ...

  4. Is Now the Time To Buy The Big U.S. ...
    Chart Advisor

    Is Now the Time To Buy The Big U.S. ...

  5. Turn Your Passion Into A Profitable ...
    Entrepreneurship

    Turn Your Passion Into A Profitable ...

  6. Who are Venture Capitalists?
    Investing

    Who are Venture Capitalists?

  7. What does the Daily Average Revenue ...
    Investing Basics

    What does the Daily Average Revenue ...

  8. How Visa Counts On Your Free-Spending ...
    Stock Analysis

    How Visa Counts On Your Free-Spending ...

  9. How To Trade Credit Card Stocks
    Chart Advisor

    How To Trade Credit Card Stocks

  10. Vertical Integration
    Investing Basics

    Vertical Integration

comments powered by Disqus
Hot Definitions
  1. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  2. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  3. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  4. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  6. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
Trading Center