Types of Letter of Credit
Not all LCs work the same way. The right structure depends on your trade arrangement, risk profile, and payment terms.
Irrevocable Letter of Credit
Cannot be amended or cancelled without the agreement of all parties. This is the standard and most commonly used type in international trade.
LC at Sight
Payment is made immediately upon presentation of compliant documents. Best for sellers who need fast settlement.
Deferred Payment LC (Usance)
Payment is made at a future date after document acceptance, typically 30 to 180 days. Gives the buyer time to receive and sell the goods before paying.
Standby Letter of Credit
Functions as a safety net rather than a primary payment method. The financial institution pays only if the buyer fails to meet their obligations. Often used as a form of bank guarantee.
Transferable Letter of Credit
Allows the original beneficiary to transfer part or all of the LC to a third party. It is commonly used by intermediaries and trading companies.
Apply NowLetter of Credit vs Bank Guarantee vs Export Factoring
| Feature |
Letter of Credit |
Bank Guarantee |
Export Factoring |
| Purpose |
Guarantee trade payment |
Guarantee performance or obligation |
Advance payment on export invoices |
| Payment trigger |
Compliant document presentation |
Failure to perform |
Invoice submission |
| Who benefits the most |
Both buyer and seller |
The party receiving the guarantee |
The exporter |
| Best for |
High-value cross-border transactions |
Contracts, tenders, project bids |
Ongoing export relationships |
| Feature |
Letter of Credit |
Bank Guarantee |
Export Factoring |
| Purpose |
Guarantee trade payment |
Guarantee performance or obligation |
Advance payment on export invoices |
| Payment trigger |
Compliant document presentation |
Failure to perform |
Invoice submission |
| Who benefits the most |
Both buyer and seller |
The party receiving the guarantee |
The exporter |
| Best for |
High-value cross-border transactions |
Contracts, tenders, project bids |
Ongoing export relationships |
A letter of credit is best suited for high-value cross-border transactions where both parties need payment security. For exporters with recurring overseas orders, export factoring may offer faster access to cash flow with less documentation.
Who Should Consider a Letter of Credit?
This solution is suitable for businesses engaged in cross-border trade that need payment security.
Importers sourcing from overseas suppliers
Assure your suppliers that payment is guaranteed, enabling better pricing and trade terms.
Exporters selling to foreign buyers
Protect yourself against non-payment with a bank-backed guarantee before you ship.
Trading companies and intermediaries
Manage multi-party transactions with transferable LC structures.
Businesses entering new markets
Build trust with unfamiliar trading partners where commercial relationships are not yet established.
If you trade internationally and need a secure, structured way to pay, a letter of credit facility can help.
Eligibility Criteria
To qualify for a letter of credit facility with IFS Capital, your business should:
Be registered and operating
in Malaysia
Be engaged in
import or export trade, or both
Have an
established business track record
Demonstrate the
ability to fulfil trade obligations
IFS Capital will review your trade history and financial position. It will also review the type of transaction as part of the assessment.
What Does a Letter of Credit Cost?
Costs associated with an LC facility typically include:
- Issuance fees (percentage of the LC value)
- Amendment or negotiation fees
- Document handling and verification charges
- Confirmation fees (if a confirming bank is involved)
The total cost depends on the LC value, tenure, transaction complexity, and the risk profile of the parties involved. IFS Capital provides transparent pricing so you can evaluate the cost before committing.
Why Choose IFS Capital for Letter of Credit Facilities
IFS Capital combines deep trade finance expertise with practical execution to support your international trade needs.
- Supporting Malaysian SMEs since 2006
- Part of the PhillipCapital group, backed by SGX-listed IFS Capital Limited
- Associate Member of FCI with access to factor partners across 90 countries
- Margin of finance up to 80% of cost of goods
- Validity of up to 120 days
- Fast processing and efficient document handling
- Transparent terms with no hidden fees or complexity
We deliver practical, scalable financing solutions to support cross-border trade with confidence.
Apply NowIndustries We Serve
IFS Capital supports letter of credit facilities across key trade sectors in Malaysia:
Secure payment for imported materials and protect export receivables.
Support high-value trade cycles with global buyers and suppliers.
Manage commodity trade with structured payment assurance.
Facilitate cross-border shipments with payment security for both parties.
Enable import and export across ASEAN, East Asia, and global markets.
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