Deferred Reimbursement

Definition

Deferred Reimbursement. It is an arrangement under a letter of credit where the issuing financial institution agrees up front with its customer,the applicant, to pay the beneficiary upon presentation of the documents required in the letter of credit but to defer charging the applicant until a later date.

In this way, the financial institution finances the purchase of products under the letter of credit. Ideally, the delay would be for the expected time the applicant needs in order to use or re-sell the products.