Red Clause Letter of Credit

A red clause Letter of Credit facilitates pre-shipment finance for the beneficiary. It is often used to assist suppliers in paying for materials and labour or perhaps an intermediary, who needs financing to conclude a transaction. It is useful in situations where the customer‟s supplier is trusted but has difficulty in sourcing the raw materials or goods unless payment is made in advance. An important point to note is that in the event the customer‟s seller does not perform under the LC, Standard Charted Bank's customer, as applicable, would still be liable for settlement of the advanced funds.