Trade Finance Cost (Letter of Credit)
Estimate the total cost of financing an import/export shipment via a letter of credit or similar trade finance facility, and its effective annual cost rate.
Gegevens gecontroleerd · juli 2026
Why annualise the cost rate?
Trade finance facilities run for different periods (30, 60, 90+ days), so annualising the total cost as a percentage lets you compare facilities of different tenors on a like-for-like basis.
Bron: UK Finance / British Business Bank — trade finance guidance; ICC Uniform Customs and Practice for Documentary Credits (UCP 600), 2025/26. · bijgewerkt 2026
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Alles over Trade Finance Cost (Letter of Credit)
📋Overzicht+
Combines the bank's letter of credit issuance fee (charged on the full shipment value), the interest cost on the financed portion of the shipment over the finance period, and any other fixed fees (courier, SWIFT, amendment charges) into a total cost, then annualises it to give an effective annual cost rate comparable across facilities of different tenors.
💡 Best practices
- Compare the effective annual cost rate, not just the headline fee, when weighing up trade finance offers with different tenors.
- Shorter finance periods reduce interest cost but the fixed LC issuance fee stays the same, so it weighs more heavily on very short-term facilities.
- Ask your bank whether the advance rate can be improved with additional security or a longer banking relationship.
🔢 Concreet voorbeeld
£100,000 shipment, 0.75% LC fee, 7% finance rate over 90 days, 100% advance rate: £750 LC fee + roughly £1,726 interest = about £2,476 total cost, an effective annual cost rate of around 10%.
📖Handleiding+
Zo gebruikt u deze rekentool
- 1
Enter the shipment value and the LC issuance fee percentage quoted by your bank.
- 2
Enter the finance rate and the number of days the facility runs for.
- 3
Enter the advance rate if the bank only finances part of the shipment value.
- 4
Add any other fixed fees, such as SWIFT or amendment charges.
📚Woordenlijst+
- Letter of credit (LC)
- A bank's payment guarantee to an exporter on behalf of an importer, used to reduce counterparty risk in international trade — issued for a fee against the shipment value.
- Advance rate
- The percentage of the shipment value the bank is willing to finance — the remainder must typically be funded by the importer or exporter directly.
ℹ️Bronnen & updates+
Laatste gegevensupdate
7 juli 2026
Bronnen en referenties
UK Finance / British Business Bank — trade finance guidance; ICC Uniform Customs and Practice for Documentary Credits (UCP 600), 2025/26.
De gegevens van deze rekentool worden regelmatig bijgewerkt volgens de laatste officiële tarieven. Raadpleeg bij twijfel de bovenstaande officiële bronnen.
FAQ — Trade Finance Cost (Letter of Credit)
Why annualise the cost rate?+
Trade finance facilities run for different periods (30, 60, 90+ days), so annualising the total cost as a percentage lets you compare facilities of different tenors on a like-for-like basis.
What if the bank doesn't finance the full shipment value?+
Set the advance rate below 100% — only that portion of the shipment value is treated as financed and accrues interest, while the LC issuance fee is still charged on the full shipment value.