Letter of Credit

A letter of credit is a guarantee that a buyer's payment to a seller will be received on time, in full, and with specified conditions met. It is a legally binding contract issued by a financial institution, and in the event a buyer is unable to fulfill his obligations, the financial institution will cover the outstanding amount.

For example, a municipal government may require a builder to get a letter of credit as insurance against damage to town property. If the builder damages sidewalks or other property in the construction process, the town is assured that the builder has funds (or will have access to funds) to cover the damage.

Provincial New Home Warranty programs may require builders to get letters of credit to show the builder will be able to cover any deficiencies that may arise.

All normal lending limits and criteria apply to letters of credit. 

Please contact us if you have any questions!


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