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An Introduction to Payment at Sight Letter of Credit

In the arena of international trade, a letter of credit bears a huge importance for all the involved business partners. Whether you are a small trader, an entrepreneur, or a big corporate firm, or owner of a huge industrial unit, the provision for payment at sight LC lets you conduct the relevant business operations without any fuss. Moreover, if you are an international buyer, the letter assures a refund in case of default in the delivery of your order.

International Trade

The Foundation of The Sight LC

The letter is issued within a regulatory framework by the bank. As a seller, you need to submit pertinent documents to the bank in order to get the letter issued. The core of the documents must exhibit your worthiness as having met all the required obligations that have been clearly mentioned in the deal or the contract. Keep in mind that a letter of credit is totally different instrument from a purchase agreement. It is also not at all similar to any sales agreement. The LC makes it mandatory with a security net that all the parties should oblige or comply by the specific requirements of the deal.

Sight LC From the Seller’s Viewpoint

The obvious feature of an LC is it assures you of payment when you are a seller and selling something to a trading partner globally. You need to diligently meet all the crucial terms and related conditions on the credit letter. Take a note that if the issuing bank has a huge reputation in the market, then your chances of payment become more robust. Suppose the buyer fails to pay the amount as agreed or defaults in installments, the bank comes into the picture and rescues you from the fund crunch.

Signed Trade Deal International Seller

The Buyer’s Perspective in A Sight LC

Now, assume that you are the buyer and have signed a trade deal with an international seller. You have already paid for the order that you have placed. You have either paid full in advance or forwarded a major chunk of the payment. What will happen when the seller fails to deliver the order? Will you stop your business operations? In such cases, the sight LC will protect you against these types of business troubles. You need to provide the proof of payment to the bank. The bank will assess all the important documents related to the deal and process an apt refund for you. Your money will be retrieved via processing of a letter of credit.

Learn more about LC by exploring the service pages of a reliable financial institute’s website.