Legal Definitions - revolving letter of credit

A revolving letter of credit is a type of letter of credit that self-renews by providing for a continuing line of credit that the beneficiary periodically draws on and the bank customer periodically repays. It is used when there will be multiple drafts under a single transaction or multiple transactions under a single credit.

For example, a company may use a revolving letter of credit to purchase goods from a supplier on an ongoing basis. The supplier can draw on the credit as needed, and the company will periodically repay the bank. This allows for a more efficient and streamlined payment process.