Synthetic Letter Of Credit


DEFINITION of 'Synthetic Letter Of Credit'

A letter of credit that has been pre-funded by the bank on the closing date, instead of when the funds are drawn as needed. The funds accessible through a synthetic letter of credit are typically held in a credit-linked deposit account until required.

BREAKING DOWN 'Synthetic Letter Of Credit'

Since the funds borrowed through a synthetic letter of credit are given immediately, they are a more liquid source of funds to the borrower than a standard letter of credit. The proceeds are therefore considered more secure, as there is no counterparty risk which could result in the funds becoming unavailable.

  1. Transferable Letter Of Credit

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

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

    A letter of credit that is payable once it is presented along ...
  4. Bank Letter Of Credit Policy

    An insurance policy that allows U.S. banks to confirm letters ...
  5. Fully Funded Documentary Letter ...

    A written promise of payment provided by a buyer to a seller ...
  6. Standby Letter of Credit - SLOC

    A guarantee of payment issued by a bank on behalf of a client ...
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