A Letter of Credit is a financial document issued by a bank that guarantees payment to a seller on behalf of a buyer. It ensures that the seller will receive the agreed amount as long as they meet specific conditions outlined in the letter, such as providing certain documents or shipping goods by a certain date. This tool is commonly used in international trade to reduce risks for both parties. The buyer can be assured that the seller will be paid if they fulfill their obligations, while the seller can trust that the payment is secure, as it is backed by a reputable financial institution.