Synthetic Letter of credit (Banking & Finance Glossary)

Summary

A Letter of Credit that has been pre-funded by the Lenders on the Closing Date, instead of a standard Letter of Credit, whereby the Beneficiary requests a drawing, as needed. The funds accessible through a Synthetic Letter of Credit are typically held in a credit-linked deposit account, until the funds are needed. Synthetic Letters of Credit are a more liquid source of funds than a standard Letter of Credit.