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Simple English definitions for legal terms
revolving letter of credit
Read a random definition: law court of appeals
A quick definition of revolving letter of credit:
A revolving letter of credit is a type of agreement between a bank and a customer, where the bank agrees to pay a third party (the beneficiary) as long as certain conditions are met. This type of letter of credit is used when there will be multiple payments or transactions under a single credit. It self-renews, meaning the beneficiary can periodically draw on the credit and the customer will periodically repay it.A more thorough explanation:
A revolving letter of credit is a type of letter of credit that self-renews by providing for a continuing line of credit that the beneficiary periodically draws on and the bank customer periodically repays. It is used when there will be multiple drafts under a single transaction or multiple transactions under a single credit.
For example, a company may use a revolving letter of credit to purchase goods from a supplier on an ongoing basis. The supplier can draw on the credit as needed, and the company will periodically repay the bank. This allows for a more efficient and streamlined payment process.