With recourse /without recourse letter of credit
A Recourse Letter of Credit allows the financing bank to claim payment from the beneficiary if the applicant defaults, while a Without Recourse Letter of Credit does not. These terms define the risk assumption between the bank and the beneficiary in the event of non-payment.
For example, if Company A in the U.S. purchases goods from Company B in China with a recourse letter of credit, Company B can seek payment directly from Company A if they default. With a without recourse letter of credit, the risk shifts to the issuing bank, and Company B cannot pursue Company A if the bank fails to pay.
