LC (Letter of Credit) Opening Process for Small Business in Bangladesh: The Ultimate Guide (2026)
For any small business owner in Bangladesh, the dream of growth often lies across the ocean. Whether it’s importing textile machinery from China, spare parts from Japan, or electronics from Dubai, global trade is the key to scaling up.
But standing between you and your goods is one of the most intimidating financial instruments in the world: The Letter of Credit (LC).
If you are Googling “LC opening process for small business,” you are probably confused by terms like SWIFT code, Bill of Lading, IRC, and Margin. You are not alone. The banking bureaucracy in Bangladesh can be a nightmare for newcomers.
In this comprehensive guide, we will break down the entire LC process into simple, actionable steps. But more importantly, we will show you how to bypass this entire headache and import hassle-free with Total Import Solution.
Part 1: What is an LC (Letter of Credit)?
In simple terms, an LC is a guarantee from your bank to the supplier’s bank.
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The Trust Gap: You don’t trust the Chinese supplier to ship the goods if you pay first. The supplier doesn’t trust you to pay if they ship first.
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The Bridge: Your bank says, “Ship the goods. If the documents are correct, we promise to pay you.”
For small businesses, the LC is often the only legal way to transfer large amounts of foreign currency (USD/RMB) out of Bangladesh for trade purposes.
Part 2: Pre-Requisites (Documents You Need BEFORE Going to the Bank)
Before you even step inside a bank in Motijheel or Gulshan, you must have a “Water-Tight” business profile. Banks in 2026 are strict. You need:
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Trade License: Up-to-date and renewed.
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TIN Certificate: With recent tax return proof.
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VAT Registration Certificate (BIN): Mandatory for all importers.
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IRC (Import Registration Certificate): This is the “Import License.” You must apply to the CCI&E (Chief Controller of Imports and Exports).
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Commercial IRC: For traders (High fees).
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Industrial IRC: For factory owners.
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Bank Solvency Certificate: Proof that you have money.
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Membership Certificate: From a relevant trade body (e.g., Dhaka Chamber of Commerce).
🛑 Reality Check: Collecting these documents can take 3 to 6 months and cost Tk 50,000+ in government fees and bribes. Don’t have these? Skip to Part 5 to see how Total Import Solution solves this.
Part 3: The Step-by-Step LC Opening Process
Here is the exact workflow for opening an LC in Bangladesh.
Step 1: Get the Proforma Invoice (PI)
Contact your supplier (e.g., on Alibaba) and ask for a Proforma Invoice.
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Must Include: Product description, Unit price, Total value, HS Code, Country of Origin, and Payment Terms (e.g., “Irrevocable LC at Sight”).
Step 2: LCA Form (Letter of Credit Authorization)
Go to your bank and fill out the LCA Form. This authorizes the bank to open the LC. You will need to pay the LC Commission fees here.
Step 3: Insurance Cover Note
You cannot open an LC without Marine Insurance.
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Go to an insurance company (e.g., Green Delta, Pragati).
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Pay the premium based on invoice value.
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Get the Insurance Cover Note.
Step 4: LC Application & Margin Deposit
Submit the PI, Insurance Cover Note, and LCA Form to your bank.
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The Margin Issue: For small businesses, banks often demand 100% Cash Margin.
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Example: If you are importing goods worth $10,000, you must deposit equivalent BDT + extra buffer (approx 12-14 Lakh Taka) into the bank before they open the LC.
Step 5: Transmission via SWIFT
Once approved, your bank sends the LC via SWIFT message to the supplier’s bank in China/abroad.
Step 6: Shipment & Documents
The supplier ships the goods and sends the shipping documents (Bill of Lading, Invoice, Packing List) to your bank.
Step 7: Retirement of Documents
Your bank calls you. You pay the remaining amount (if any), Customs Duty, and bank charges. The bank gives you the original documents.
Step 8: C&F and Delivery
You hire a C&F Agent (Clearing & Forwarding) at Chittagong Port. They submit the Bill of Entry, assess taxes, pay duties, and release the goods.
Part 4: The Hidden Pain Points for Small Businesses
While the process above sounds “standard,” here is what actually happens to SMEs in Bangladesh:
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Dollar Crisis: Banks are currently refusing to open LCs for “Non-Essential” items (like luxury goods, cosmetics, or high-end gadgets) due to the USD shortage.
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Hidden Bank Charges: SWIFT charges, advising fees, amendment fees, and discrepancy fees can eat up 3-5% of your profit.
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Port Demurrage: If the bank delays handing over documents by even 2 days, your goods sit at the port, racking up thousands of Taka in fines.
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Quantity Limits: You cannot open an LC for small orders (e.g., $500 or $1,000). Banks usually laugh at small LC requests.
Part 5: The Smart Alternative – “Door-to-Door” Import (No LC Needed)
What if you could skip the Bank, the IRC, the Customs, and the paperwork?
Total Import Solution offers the modern way to import. We call it the “Digital Import Model.”
How It Works:
Instead of you being the importer, WE act as the importer.
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You Shop: You choose the product on Alibaba, 1688, or find a supplier.
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You Pay Us: You deposit BDT (Taka) to our local bank account. No need for USD endorsement.
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We Handle It All:
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We pay the supplier in China/USA.
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We ship the goods to our warehouse.
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We clear Bangladesh Customs using OUR License.
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We pay the Duty & VAT.
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Delivery: We deliver the goods to your shop door.
Comparison: LC vs. Total Import Solution
Part 6: About Total Import Solution
We are Bangladesh’s leading logistics partner for the next generation of businesses. We bridge the gap between global giants like Alibaba and local entrepreneurs like you.
Our Core Services:
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Door-to-Door Import: From China (Alibaba/Taobao), USA (Amazon/eBay), UK, Dubai, and Malaysia.
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Export Services: Taking Bangladeshi products to the world.
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Heavy Machinery: Importing industrial equipment without LC.
Why Trust Us?
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Physical Office: Visit us in Dhanmondi, Dhaka.
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Tracking: Real-time updates on your shipment.
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Experience: Over 10 years of handling complex customs clearance.
Part 7: Start Your Import Journey Today
Don’t let the complex LC opening process kill your business idea. Whether you want to bring in a container of machinery or a carton of gadgets, we have a solution tailored for you.
Get a Free Quote (No LC Required):
Total Import Solution Your Gateway to Global Trade
📞 WhatsApp / Hotline: +880 1717-954302 📧 Email: totalimportbd@gmail.com
🌐 Website: totalimportsolution.com
Frequently Asked Questions (FAQ)
Q: Is importing without an LC legal? A: Yes. When you use Total Import Solution, we import the goods legally under our commercial LC and license, paying all government taxes. We then distribute the goods to you locally. It is 100% compliant.
Q: How much does an LC cost? A: Opening an LC costs Bank Commission (0.20% – 0.50% per quarter), SWIFT charges (Tk 3,000 – 5,000), and other processing fees. This does not include the 100% margin you must deposit.
Q: Can you help me open an LC if I really want one? A: Yes. If you are a large corporate client and prefer the LC route, our consultancy team can guide you through the banking process and provide C&F support at the port.
Simplify your business. Skip the bank queues. Import smarter with Total Import Solution.
