LC payment terms export

1. LC at Sight: The Fastest Path to Payment

An LC at Sight is the most secure and fastest payment term available under a Letter of Credit.

How it Works

1. Shipment: You ship the goods and prepare the required documents (Invoice, Bill of Lading, Certificate of Origin, etc.).

2. Presentation: You present the compliant documents to your bank (the Advising/Negotiating Bank).

3. Payment: Once the documents are verified as compliant, payment is due “at sight”—meaning immediately.

Pros for the Exporter

• Maximum Security: Payment is guaranteed by the bank upon presentation of compliant documents.

• Immediate Cash Flow: You receive funds within days of shipping, immediately boosting your working capital.

• Lowest Risk: Minimal exposure to political or commercial risk since payment is almost instant.

The Exporter’s Checklist for LC at Sight

• Ensure every single document detail (name, address, product description) perfectly matches the LC.

• Understand the presentation period (the number of days you have to present documents after the shipment date).

2. LC at Usance (Time Credit): The Negotiating Tool

An LC at Usance, or Time Credit, provides the Importer with a credit period before they have to pay the Issuing Bank.

How it Works

1. Shipment & Presentation: (Same as LC at Sight).

2. Acceptance: The Issuing Bank (or a Confirming Bank) accepts the compliant documents, thereby guaranteeing payment on a future, fixed maturity date.

3. The Usance Period: Payment is deferred for a specific period, typically:

   • 30/60/90 days after sight (after the bank accepts the documents)

   • 30/60/90 days after the Bill of Lading (B/L) date (after the date of shipment)

4. Final Payment: On the maturity date, the bank pays the Exporter.

Pros for the Exporter (with a Catch)

• Competitive Edge: Offering Usance terms (e.g., 90 days) can help you win business in competitive markets where buyers need time to sell the goods.

• Bank Guarantee: Payment is still guaranteed by the bank, minimizing commercial risk.

• Financing Option (Discounting): You don’t have to wait! You can ask your bank to discount the accepted draft (Bill of Exchange). The bank pays you immediately, minus a financing charge, effectively turning the Usance LC into an instant cash flow tool.

The Globax Solutions Tip: Discounting is Key

If your buyer insists on LC 90 Days Usance, you can leverage trade finance to get paid immediately. By negotiating the draft, you turn a deferred payment into a sight payment for a small fee, keeping your working capital cycle healthy.

Final Comparison: Which LC is Right for Your Export Deal?