A letter of credit is a letter issued by the buyer's bank guaranteeing the necessary funds are available for the purchase. The letter can only be used once the terms of the sale are met, and all the necessary documentation is provided.
When importing or purchasing large wholesale orders, this payment method gives the wholesaler a lot of confidence because it takes a lot of time and effort to process a large wholesale order. If for some reason, the order is cancelled due to a lack of funds, it can be costly for wholesalers, hence why many request that you show a letter of credit.
