What Is Payable at Sight Letter of Credit?

December 27, 2019

This letter of credit is one of the quickest and easiest ways of clearing the payment that the seller is due. The letter is issued only when all the terms in the original letter of credit are completed and followed to the T. Payable at sight letter of credit is used for enhancing the supply side of the foreign trade. The buyers can avail the goods faster. However, to access this document, one has to do a lot of paperwork. Here are some other details to interest you;

Its Credible

The At sight letter of credit is often said to be one of the most credible and reliable certificates in the transaction as it ensures immediate payment. The seller is issued this document once all the terms and conditions of the exchange are met. The exporter when they have delivered the goods in the requested condition, on the due date is given the payment in the form of this letter.

This letter can then be credited at the bank or through a financial organization. The bank usually acts as a mediator here, establishing a sense of harmony and trust among the two parties. It also reduces the pressure on the exporter and importer.

The Role of The Bank

The bank is the connecting link which brings the buyers and sellers together. It also is the referee here who regulates and monitors the multiple aspects of the transactions. With the banks presiding over the exchange, you can be rest assured that the transaction is legal and complies with the rules of the agreement. It also reduces the risk of any foul play or forgery from either the buyer or the seller.

The bank also acts as a guarantor and assures the proper payment of the credit in case their client is unable to do so. The banks offer this facility only to businesses with a proven credit worthiness.

Benefits to Exports and Importers

At sight letters of credit are an important aspect of international trade that you shouldn’t mess up. The exporters and importers involved in this exchange are spared the hassles of having to argue over the terms of the transactions. They can also save up on the time and money required to draft these documents and complete the paperwork. With banks endorsing the payment of the clients, they get added brand value and reputation in the market as well.