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. Settlement Agent

    1. The party involved in completing a transaction between a buyer ...
  3. Buyer's Market

    A situation in which supply exceeds demand, giving purchasers ...
  4. Simultaneous Closing - SIMO

    A real estate financing strategy in which two simultaneous transactions ...
  5. Conditional Offer

    In general, an agreement between a buyer and a seller that an ...
  6. Cost, Insurance and Freight - CIF

    A trade term requiring the seller to arrange for the carriage ...
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. Personal Finance

    Tips For Face-to-Face Buying And Selling

    Be aware of these dangers when buying or selling goods in person.
  6. 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.
  7. 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.
  8. 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.
  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. Investing

    What's a Hire Purchase?

    Hire purchase is a term used in Great Britain to describe an installment plan payment arrangement.
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's the difference between cash-on-delivery differ and delivery against payment?

    Find out more about cash on delivery and delivery versus payment transactions and the difference between these two types ... Read Answer >>
  4. What options strategies are best suited for investing in the banking sector?

    Learn how shrewd investors employ the covered call options strategy to capitalize on the banking sector's reputation for ... Read Answer >>
  5. What does it mean when advertisers say that "financing is available"? Should I trust ...

    When an advertisement says "financing", it means that the seller is going to give you a loan on an item that you purchase. ... Read Answer >>
  6. When are you legally required to get a letter of credit?

    Learn how exporters or importers who deal in international trade use letters of credit to ensure that transactions are safe, ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

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

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

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