What is a red clause LC?

A red clause LC is a documentary credit with a special clause authorizing the advising bank to make an advance payment to the seller against a simple receipt (unsecured loan) or against an advance payment guarantee confirmed by the advising bank (secured loan) in case the seller failed to deliver/ship.

This type of LC is common in the world of contracting where a lot of subcontract works takes place + or importing special tailored types of machinery where the manufacturer requests advance payment at sight to initiate the work. 

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A type of LC's where the buyer provides a kind of a loan to the seller, where he can clain any products, its usually used by buying agents.

LC means Letter of Credit,

LC is a secuire payment systems.

Red clause LC is as unsecured loan.