how an iloc works
an iloc is a means of facilitating a transaction between a buyer and seller with the assistance of their respective banks the buyer requests an iloc from his bank which is then sent to the seller s bank in addition to providing credit risk protection an iloc typically also specifies important details of the transaction such as price payment terms and time and place for delivery of goods in the event the buyer fails to make payment as agreed the buyer s bank makes payment to the seller s bank which in turn renders payment to the seller the beneficiary of the iloc ilocs can also be either confirmed or unconfirmed a confirmed iloc offers additional risk protection for the seller by providing a guarantee of payment from both the buyer s bank and the seller s bank with an unconfirmed iloc the seller s bank has no liability for payment and essentially serves only as a go between to transfer payment to the seller from the buyer s bank an iloc can be reversible and amended but every party involved must agree to the change contents of an iloceach irrevocable letter of credit may address a unique creditor or situation generally speaking all irrevocable letters of credit will contain roughly the same information this information includes but is not limited to 1