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LOC is a written obligation of the bank to pay a certain amount of money to the Beneficiary on behalf of the Applicant upon meeting certain conditions (i.e. presentation of the documents confirming the successful execution of the deal between the Beneficiary and the Applicant). In essence it's a mechanism which provides a guarantee of payment to the Beneficiary and at the same time protects the Applicant and ensures that the payment is made only after the fulfillment of all obligations by the Beneficiary.
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