Sight LC vs. Usance LC
Immediate payment LC vs. deferred payment LC, key in international trade.
Detailed Description
Sight LC vs. Usance LC
What is a Sight LC?
A Sight Letter of Credit is a financial instrument that guarantees immediate payment to the seller upon presentation of the required documents.
What is a Usance LC?
A Usance Letter of Credit allows for payment to be made at a specified future date after the documents are presented.
What are the key differences between Sight LC and Usance LC?
The main difference is the timing of payment; Sight LC offers immediate payment, while Usance LC defers payment to a later date.
When should a seller use a Sight LC?
A seller should use a Sight LC when immediate payment is crucial to mitigate risk and ensure liquidity.
What are the risks associated with Usance LC?
Usance LCs carry risks such as delayed payment and potential financial losses if the buyer faces insolvency.