Usance L/C (Time L/C)

A usance L/C (or time L/C) refers to a letter of credit under which the issuing bank or the paying bank, after receiving documents that comply with the terms of the L/C, does not make payment immediately, but undertakes to pay on a specified future date. Its core feature is "deferred payment," with common tenors such as 30 days, 60 days, or 90 days after sight. Use cases: usance L/Cs are often used when importers seek time for capital turnover, or when exporters offer buyers a credit period in order to secure orders. Points to note: exporters must bear the risk of deferred foreign exchange collection and exchange rate fluctuation risk, and may consider forfaiting or discounting; importers need to pay attention to their obligation to pay at maturity and avoid default. The difference from a sight L/C lies in the timing of payment: under a sight L/C, payment is made immediately after documents comply, while under a usance L/C, payment is deferred. It differs from a usance L/C payable at sight, which, although usance in nature, can be paid at sight, with discount charges borne by the importer. In addition, under a usance L/C, after presenting documents, the exporter must wait until maturity to receive payment, and during this period may obtain financing against the accepted draft.