Letter of Credit in Dubai, UAE - Components, Types, Process - Dhanguard
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Letter Of Credit in the UAE

Connect with us to secure a Letter of Credit in the UAE

With great connection with banks, let us help you to secure a Letter of Credit in a hassle-free manner. Our dedicated team will help you with the paperwork and documentation. Thus, enabling you to get a letter of credit in comparatively lesser days than normal.

Different types of Letters of Credit:

  • Irrevocable Letter of Credit
  • Revocable Letter of Credit

Letter of Credit is a financial document that is used in international trade. It is a payment guarantee offered by the bank to the supplier of the goods. A “Credit Letter” that is issued by the bank will be a kind of promise to the seller of the goods if the buyer fails to make the payment of the purchased goods. Dhanguard being one of the Letter of Credit Providers in Dubai, Connect to get assistance.


What is Letter of Credit?

Before proceeding further, let’s understand what is meant by Letter of Credit. In simple word, Letter of Credit can be referred to as ‘Lifeblood of any International Commerce’. It is governed by Federal Law No. 18 of 1993 of the Commercial Transactions Law.

Letter of Credit can be stated as a contract in which the issuing bank approves to provide a substantial amount of finance at a precise period when the applicant requests for the payment. The financed amount will be provided in the name of the seller of the goods who is also known as the beneficiary. This financial assistance is secured by document that represents goods are being shipped or being prepared for the shipment.

What are the components of Letter of Credit?

The components of Letter of Credit are as follows-

Issuing Bank

The Name and details of the banks that offers you the credit should be mentioned.


The name and details of the applicant who arranges for payment.


The name and details of the beneficiary who is going to receive the payment from issuing bank.

Specified Time Limit

The time limit for the Payment has to be mentioned.


The parties to the Letter of Credit should agree up on the Terms and Conditions listed in the letter.

Specified Place

The document has to be presented at a specified place, and that place should be mentioned in the document.

In Letter of Credit Procedure, the credit provided has to be mentioned with respect to the agreement of Sale that is agreed by the buyer as well as the seller. If the credit stated in the Letter of Credit and the agreement are not same, the seller has the right to reject it.

What is the Process for Letter of Credit?

Once the bank has confirmed the credit amount, the beneficiary will be informed directly or any other communicator bank in the place of the beneficiary about the credit. The communicator bank will then contact the beneficiary and get authorization from them. Henceforth the communicator bank will be accountable to make payment to the beneficiary. 

What are the Types of Letter of Credit?

As per the Commercial transactions law, there are two types of letter of credits available. They are as follows-

Revocable Letter of credit

In this type of letter of credit, the credit can be annulled or modified at any time. Lastly, it should not hold any liability with regards to the beneficiary. 

Once the terms and conditions with the required documents are met, the letter of credit will be honored. It is mostly used to offer guidelines for the consignment.

Irrevocable Letter of credit

An irrevocable letter of credit cannot be cancelled without the agreement of the beneficiary with the issuing bank as well as the confirming bank. It offers a fine relationship between the bank and the beneficiary. Consequently this kind of Letter of Credit guarantees security to the beneficiary concerning the payments.

What is the Importance of Letter of Credit?

Letter of Credit is more significant in trade in the UAE because the country has commercial deals all across the globe. A documented credit transaction or letter of credit transaction, demands trust towards the issuing banks. Both the buyer and seller must have assurance that the bank will justify the payment commitments. A Letter of Credit Process builds up confidence for both the performing parties. 

Frequently Asked Questions

Letter of Credit is a contract in which the issuing bank agrees to provide a noteworthy amount of funding at a specific period when the applicant requests for it.

The letter of Credit has a certain steps that are required to be followed. Contact us at Dhanguard to know more about this process.

There are several types of Letter of Credit. As per the UAE law, there are two most common type of credit known as Revocable & Irrevocable Letter of Credit.

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