The Purpose of Using LC At Sight
A Sight or At Sight LC is a type of LC that guarantees immediate payment once the exporter fulfills all the conditions of the LC and submits the necessary documents to prove it. It is referred to as sight because the payment starts being processed once the document has been sighted by the issuing bank. Unlike the deferred LC which may take months before the payment is processed and sent to the exporter, the sight LC takes only a few business days. A dream come true for any exporter/seller. The bank spends most of the time reviewing the documents and terms and conditions. In some cases, the documents might be sent to another trusted bank for their thorough and impartial review. Once this is done, all that’s left is the wire transfer which is relatively fast. You can see that the sight LC is pretty convenient. Below are some more reasons why you should complete your trade payment at sight LC.
It Protects Both Parties Involved
An at Sight LC guarantees the satisfaction of the exporter and importer. It creates a win-win situation for both parties. It protects them in the sense that, the exporter will be paid before the importer receives his shipment, and the importer must receive proof of the shipment before sending the money. Both ends are transparent.
The Exporter Has Better Control of His Capital
Because the exporter gets paid on time (as long as the necessary documents are submitted and accepted), he is able to efficiently allocate his working capital to other projects. He has a guaranteed cash flow so he can confidently grow his business.
The Importer Has A Competitive Advantage
When using a slight LC, the importer does not take any credit period from the exporter. This means that the importer has more bargaining power and can negotiate prices and terms with the exporter until a fair deal is made.
The Terms and Conditions Are Flexible
Both parties can put in their own terms and conditions and come to an agreement. If they’re entering a long-term partnership, the sight LC can also be customized to avoid starting all over for each transaction.
It Helps You Find Trustworthy Business Partners
A slight LC is a bit difficult to get, because of the application process. Only companies who actually mean the business would go through the trouble of obtaining one. This proves that neither party can cheat each other. You can, therefore, proceed to build a business relationship (if you want) with the other party.
For more information about the slight LC and other financial tools, visit Capital.