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Letter of Credit

Suppliers paid on time, your cash kept free.

Type: Inland / Import LC
Use: Supplier & trade payments
Usance: Sight or up to 180 days

Apply for LC or message on WhatsApp

At A Glance

Purpose: A bank's payment promise to your supplier
Who can apply: An established trading or manufacturing business

See what you will need

The Short Version

What Letter of Credit actually does for you.

A letter of credit is a payment promise given by the bank to your supplier. It may help you get better credit terms without using your own working capital.

What's included

Sight or usance structures
Buyer's credit tie-ups arranged where available
Support with documentation and resolving discrepancies

Do you qualify?

An established trading or manufacturing business
A sanctioned LC limit, or full cash margin in its absence
A supplier contract or proforma invoice on file
Proprietorship, partnership, LLP or company
A good credit standing for the business and its promoters

Which One Are You

Proprietor / ProfessionalYou run a business in your own name, or practise a profession such as medicine, law, accountancy or architecture. There is no separate company, so the lender looks at you and the business together: your ITRs, your financial statements and your business bank account. Clear books and returns filed on time help a lot.

Partnership / LLPThe business is a partnership firm or an LLP. The lender checks the firm's registration, its financials and its bank statements, and also the standing of each partner, so every partner's KYC and tax returns are usually needed. A signed partnership deed that allows borrowing keeps things smooth.

CompanyThe business is a private or public limited company. The lender checks the incorporation papers, the directors and the shareholding, the company's audited financials and its bank statements. A board resolution authorising the loan is usually needed, and directors may be asked to stand as guarantors.

Documents Required (Checklist)

For Self-Employed

Proprietor's KYC: PAN, Aadhaar and address proof
Business proof: GST registration, Udyam, shop licence or equivalent
Last 3 years' ITR with computation of income
Last 3 years' financial statements (P&L and balance sheet), audited where applicable
Last 12 months' current and savings account statements
GST returns for the last 12 months, where registered
Details of existing loans, with EMIs and statements

For Every Applicant

KYC (PAN, Aadhaar, address proof)
Proforma invoice and supplier agreement

This is the usual list for each type of applicant. Get the exact checklist for letter of credit, sent as a PDF you can save or print.

Fees and other charges

Besides interest, a lender may charge a few fees. It helps to know them before you apply, so there are no surprises.

Commission

A percentage of the guarantee or letter of credit amount, charged for the period it is valid and often billed every quarter or year. The rate depends on the lender and your profile.

Margin money

Lenders usually ask you to keep a part of the amount as cash margin or a fixed deposit while the facility is in use.

Processing and amendment fees

A fee when the facility is sanctioned, and a smaller one if you change the amount, the period or the beneficiary.

Invocation or devolvement

If the guarantee is called on, or a letter of credit is paid by the lender, the amount is recovered from you with interest and charges.

Our service fee

For this facility we charge a service fee for taking your file from lender shortlist to disbursal. It covers comparing lenders for you, preparing and checking your documents, answering the lender's queries and following up until the money reaches you. We tell you the amount in writing before you go ahead, so you know exactly what you are paying and nothing comes as a surprise.

These are general guides and every lender sets its own fees. Your expert will share the exact charges in writing before you sign.

Why Growth Capital Services

One conversation, many lenders to compare.

We are a loan consultant, not the lender. We help you compare options from 75+ Banks and NBFCs, prepare your documents, and follow your application through each step.

Check Your Eligibility Talk to Our Loan Expert

Important note: Interest rate, loan amount, tenure, charges, eligibility, approval and disbursement depend on the policy of the respective Bank or NBFC, your profile, credit assessment and the applicable terms. Growth Capital Services is a loan consultant and does not lend money itself. The details on this page are for general information.

Run the numbers

Calculators for your Letter of Credit

Try your own figures before you apply — nothing is saved or sent.

Exclusive to GCS

Working Capital Limit Estimator

Based on the RBI Nayak Committee turnover method used by most banks for MSME Cash Credit, Overdraft, CGTMSE and Working Capital Term Loan limits.

Projected Annual Turnover

₹2.00 Cr

₹1 L₹50 Cr

Working Capital Gap

₹50.00 L

25% of turnover

Your Margin Money

₹10.00 L

5% of turnover

Indicative Bank Finance

₹40.00 L

20% of projected turnover — the portion typically financeable via Cash Credit, Overdraft or a Working Capital Term Loan. Actual sanction depends on financials, banking history and lender policy.

Talk to an Expert

Step-by-step guide

Letter of Credit process, step by step.

A letter of credit assures your supplier of payment. Here is how we arrange one.

Share the trade details

Tell us about the supplier, the goods, the amount and the payment terms.

Set up the facility

We help you get an LC limit sanctioned with a bank that suits your trade.

Apply for the letter

You give the bank the purchase order and details so it can issue the letter.

Supplier ships the goods

Your supplier ships against the letter and presents the documents to the bank.

Payment at maturity

The bank pays the supplier, and you repay the bank on the agreed date.

With GCS, your expert looks at your profile, matches it with suitable lenders, and coordinates with the banks for you. That means less confusion and more confidence when you apply.

Worth Comparing