In the case of foreign trade, payment is always done through banks. The supplier assigns a bank and the customer assigns a bank. The deal happens between these two banks only.
Cash Against Document (CAD): The supplier produces the documentation through its bank to the clients bank, then the client's bank hand overs the documents to its client against receiving payment. After that, the client's bank transfers the money to supplier's bank.
Letter of Credit (LC): The supplier produces the documentation through its bank to the client's bank. The client's bank directly pays against the document's submission, so the risk is on client's bank. Hence, the trust worthiness factor increases, as the client's bank guarantees the payment against documentation.
It is always preferable when both parties lack trust and want more security.
The basic difference is in CAD the client pays the money to its bank and the bank sends it to the supplier's bank. With LC, the client's bank pays the money without failing against documentation, so in LC the supplier is more assured of getting the money.
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The difference between personal credit and business credit is that personal credit only applies to one person; one's self. However business credit can be applied to the employees in any company which are covered by the business insurance.
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DA mean documents against acceptance, where company give acceptance to pay their liabilities on due date, but he can pay remit the DA before its due date , but in case of Letter of Credit, UCP are not allowed to pay the LC liabilities before its due date. Thanks Anup Das
Answering "http://wiki.answers.com/Q/What_are_the_difference_between_line_of_credit_and_credit_limit"
for the purpose of business working capital bank sanction against property and stock+debtors-credit = cash credit