Template:M summ GMSLA 8.5

... and a Letter of Credit is what, exactly?

An old fashioned form of credit support. A bank writes an unconditional letter promising to pay a (usually large) sum on money on demand and without argument to a third party on behalf of a client. This gets small companies a bit of breathing space with trade creditors. Banks charge through the nose for them: they are a form of committed funding.

Lots of formal rules and legal form-obeisance.