Why does a letter of credit reduce an importer's ability to borrow funds?
A)The importer has to pay fees to the bank for the letter of credit.
B)It is a financial liability against the importer.
C)The importer has to pay for the merchandise immediately.
D)The importer has to pay for unsatisfactory products.

Question

Quizplus · Accepted Answer

Since the letter of credit is a financial liability against the importer,it may reduce the importer's ability to borrow funds for other purposes.

Why Does a Letter of Credit Reduce an Importer's Ability