The confirmation letter-sometimes known as a comfort letter-is not a guarantee of payment, but only an assurance of the borrower's financial resources to make payment. How a Bank Confirmation Letter (BCL) WorksĪ bank confirmation letter's purpose is to assure a third party, generally a seller, that the borrower has access to sufficient financial resources to complete a transaction, such as the purchase of goods. Individuals may request a BCL during the purchase of a home or land in order to secure a mortgage or establish creditworthiness with the seller.Bank confirmation letters can also be issued for a company that is entering into a joint venture project with another company.Bank confirmation letters are typically issued to business customers vouching for their creditworthiness.The BLC is not a guarantee of payment, but an assurance of the borrower's financial resources to complete a purchase.A bank confirmation letter (BCL) validates that a bank has a line of credit in place with one of its customers.See FSP 6.9.1.3 for discussion of classification in the statement of cash flows when a paying agent is used. This may be true even if rebates are received from the card issuer based on the volume of use. Trade payable designation may still be acceptable if (1) payment is made quickly (within the month) and (2) the arrangement is more for convenience than financing. Although the reporting entity may now be legally obligated to make payment to the financial institution, this arrangement may still be classified as a trade payable since the payable arose from normal operating purchases and no financing costs are involved. In some circumstances, the use of these payment mechanisms may result in a change in the legal form of a reporting entity's liability because it pays a paying agent who had paid off and extinguished the reporting entity's obligation to a third-party vendor.
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