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. Fully Funded Documentary Letter ...

    A written promise of payment provided by a buyer to a seller ...
  5. Irrevocable Letter Of Credit - ...

    Correspondence issued by a bank guaranteeing payment for goods ...
  6. Standby Letter of Credit - SLOC

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