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. Trade Finance

    The financing of international trade. Trade finance includes ...
  2. Transferable Letter Of Credit

    A letter of credit that permits the beneficiary of the letter ...
  3. Synthetic Letter Of Credit

    A letter of credit that has been pre-funded by the bank on the ...
  4. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a ...
  5. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities ...
  6. Irrevocable Letter Of Credit - ...

    Correspondence issued by a bank guaranteeing payment for goods ...
Related Articles
  1. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  2. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  3. Economics

    How Can Companies Increase Market Share?

    Companies that increase their market share enjoy a competitive advantage. They receive better prices from suppliers, and they’re able to produce goods faster.
  4. Entrepreneurship

    Up-to-Six-Figure Loans a Business Can Get – Fast

    The banking industry has invested a lot of money into shortening loan approval times from a few weeks to a few minutes, but should you dive in?
  5. Economics

    Understanding Capital

    Capital has a variety of meanings, but it generally refers to financial resources.
  6. Economics

    Calculating Economic Profit

    Economic profit is the difference between the revenue a firm earns from sales and the firm’s total opportunity costs.
  7. Economics

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
  8. Economics

    Where Does the Term "Black Friday" Come From?

    The term Black Friday can be used in a couple of different contexts; one positive and one negative.
  9. Economics

    What is Right of First Refusal?

    The right of first refusal is a contract in which a seller grants another party the right to enter into a business transaction before anyone else.
  10. Economics

    What are Business Activities?

    Business activities are any actions in which a company engages to make a profit.
RELATED FAQS
  1. 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 >>
  2. Will Netspend cards let you overdraw your account?

    Discover if NetSpend debit cards allow you to overdraw your account. Learn how to enroll in NetSpend's overdraft protection ... Read Answer >>
  3. Does the FDIC cover business accounts?

    Learn what types of business accounts are insured by the FDIC, and find out how much of the deposits made by a business are ... Read Answer >>
  4. Do working capital funds expire?

    Find out how and why a company's working capital can change over time, though the fund does not actually expire, and how ... Read Answer >>
  5. How can I avoid escheatment of my bank account?

    Learn how to avoid escheatment of a dormant bank deposit by logging on to your online account, calling your bank or making ... Read Answer >>
  6. Are bank accounts escheatable?

    Learn why it is important to keep in contact with every financial institution you deal with to make sure your assets are ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center