What is Reimbursement Finance?

In simple terms, Reimbursement finance is financing done by reimbursing bank (bank other than letter of credit issuing bank and supplier’s bank).

When a Bank (the Issuing Bank) opens a Letter of Credit (L/C) in favor of a Beneficiary, which is advised through another Bank (the Advising Bank), the Issuing Bank is obliged to state in the L/C how the Bank which negotiates the documents under the Letter of Credit will be reimbursed for its payment to the Beneficiary, either at SIGHT or at a stated TENOR.  

A confirming bank or a nominated bank first honors or negotiates against a complying presentation under a letter of credit and then they will be reimbursed by the reimbursing banks in accordance with the issuing banks authorization.