What is the difference between a fully cash-covered documentary credit and a credit-facility one? | Ask Banky

Editor-in-Chief Mohamed Salah

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Editor-in-Chief Mohamed Salah

What is the difference between a fully cash-covered documentary credit and a credit-facility one?

Asked by Banky team 2 months ago
Banky team Reviewed editorial answer

A fully covered credit (100% cash covered) requires the importer to pay the full value of the goods in foreign currency to the bank in advance, so that it is blocked until the documents arrive.

A credit-facility documentary credit, on the other hand, is opened by the bank against credit facilities (a short-term commercial loan), and the customer repays the bank later according to the agreed maturity dates.

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