​A letter of credit is a commonly used means of payment in international trade as the rules on L/Cs are recognised by banks worldwide. The L/C payment is transacted between banks. This means your foreign buyer pays his bank, and you receive the money for the order from your bank.

When a Danish bank confirms a letter of credit to a foreign bank, the Danish bank bears the risk that the foreign bank will default on payment, provided the conditions of the L/C are met. The Danish bank can protect itself against loss with an L/C guarantee from EKF. If the bank receives no payment from abroad, EKF pays compensation.