Red Clause Letter Of Credit

AAA

DEFINITION of 'Red Clause Letter Of Credit'

A specific type of letter of credit in which a buyer extends an unsecured loan to a seller. Red Clause Letters of Credit permit documentary credit beneficiaries to receive funds for any merchandise outlined in the letter of credit. These letters are commonly used by beneficiaries who act as purchasing agents for buyers in another country.

INVESTOPEDIA EXPLAINS 'Red Clause Letter Of Credit'

The funds provided in a Red Clause Letter of Credit are known as advances. These advances are then deducted from the face amount of the credit when it is presented for payment. Red Clause Letters are usually employed to facilitate international exports and trade.

RELATED TERMS
  1. Lender

    Someone who makes funds available to another with the expectation ...
  2. Finance

    The science that describes the management, creation and study ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a ...
  4. Sight Letter Of Credit

    A letter of credit that is payable once it is presented along ...
  5. Bank Draft

    A type of check where the payment is guaranteed to be available ...
  6. Credit

    1. A contractual agreement in which a borrower receives something ...
Related Articles
  1. What is a trade deficit and what effect ...
    Credit & Loans

    What is a trade deficit and what effect ...

  2. In Praise Of Trade Deficits
    Economics

    In Praise Of Trade Deficits

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

    What's the difference between a bank ...

  4. Material Adverse Effect A Warning Sign ...
    Markets

    Material Adverse Effect A Warning Sign ...

comments powered by Disqus
Hot Definitions
  1. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  2. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  3. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  4. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  5. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
  6. Bear Flattener

    A yield-rate environment in which short-term interest rates are increasing at a faster rate than long-term interest rates. ...
Trading Center