For a relatively small fee and assuming sufficient collateral or creditworthiness of the tenant or a guarantor, a tenant may be able to apply for and have its bank issue to its landlord a letter of credit ("L/C") to secure the tenant's obligations under a long-term lease. If the L/C is large enough, the landlord may enter into a lease with a tenant that the landlord would otherwise refuse due to the tenant's lack of creditworthiness. From the tenant's perspective, an L/C may be preferable to a large security deposit. An L/C will not necessarily tie up large amounts of the tenant's cash or other liquid collateral, as would a security deposit. Instead, the cash can be deployed as working capital in the tenant's business.
Carter H. KleinPart One of a Two-Part Series
For a relatively small fee and assuming sufficient collateral or creditworthiness of the tenant or a guarantor, a tenant may be able to apply for and have its bank issue to its landlord a letter of credit (“L/C”) to secure the tenant's obligations under a long-term lease.
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An annual tradition continues as we present the responses to our Legalweek question. For 2026, it was "where are we with prompting"?
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