Trade Finance
LC Payment Terms: Sight vs Usance LC & 60/90/120 Day Tenors (2026)
A letter of credit’s payment terms decide when you actually get paid. Here is the difference between sight and usance LCs, what 60/90/120 day tenors mean for importer and exporter, and how LC discounting brings a usance payment forward into days.
Why LC payment terms matter
A letter of credit is a bank’s payment promise, but the promise has a timing attached to it. The payment terms of an LC decide whether you are paid at sight — as soon as you present compliant documents — or 60, 90 or 120 days later. For an exporter, that difference is weeks or months of working capital; for an importer, it is free credit from a bank-guaranteed instrument.
Getting the terms right — and knowing how to finance the gap when you accept a long tenor — is one of the most practical skills in trade.
Sight LC vs usance (time) LC
| Feature | Sight LC | Usance (time) LC |
|---|---|---|
| Payment timing | On presentation of compliant documents | At the tenor (60/90/120 days) after presentation |
| Cash flow for exporter | Paid within days of shipment | Cash locked until maturity |
| Credit for importer | None — pays at once | Deferred payment on bank-guaranteed terms |
| Financing need | Low | High — usually bridged by LC discounting |
| Risk | Lowest for exporter | Requires tenor risk management |
What 60/90/120 days means
A usance LC’s tenor — 60, 90 or 120 days — is the credit period granted by the exporter to the importer, measured from a defined event, usually the bill of lading date or the date of presentation. A 90-day LC, for instance, commits the issuing bank to pay 90 days after that event, provided the documents presented were compliant.
Longer tenors are a competitive tool: importers buy them because they get bank-secured credit, and exporters offer them to win orders. But every extra 30 days is another month of your cash sitting in the payment pipeline — which is exactly the problem discounting solves.
DA vs DP: acceptance or payment
Alongside the tenor, the LC specifies how documents are released. Under DP (documents against payment), the buyer pays before receiving the documents — tight and exporter-friendly. Under DA (documents against acceptance), the buyer accepts the bill of exchange and takes the documents, with payment due at maturity — this is what makes usance tenors work.
As an exporter, DA on a long tenor means you hand over the goods against a promise to pay later. That promise is the LC, and it can be discounted — but only if your buyer’s market and issuing bank support it.
Bridging the gap: LC discounting
When you accept a 60/90/120 day tenor, you do not have to wait it out. LC discounting lets you sell the usance LC after presentation: a financier advances the value now, at a discount, and is repaid by the issuing bank at maturity. The exporter gets cash in days; the importer keeps the full tenor.
Pricing for LC discounting is driven by the issuing bank’s standing and the buyer country risk — indicative discounts run around 7–13% p.a. ⚠️ depending on the LC. A strong issuing bank means a cheaper discount, which is why checking your buyer country and asking for a bank with a good standing both pay off.
UCP 600 and documentary compliance
Every LC operates under UCP 600, the ICC’s uniform rules for documentary credits. Banks examine documents strictly against the LC terms — amounts, descriptions, dates, ports, incoterms. A single discrepancy can delay or stop payment, and on a usance LC it can also postpone the start of your tenor.
The practical rule: build the document set exactly to the LC before presentation, and self-check it. Clean documents are what make both the sight payment and the discounting transaction fast and cheap.
Practical tips for negotiating LC tenors
- Match the tenor to your real working capital cycle — do not accept 120 days you cannot fund.
- Check your buyer’s market for LC discounting coverage before you agree to a long tenor.
- Negotiate the event: a tenor from the bill of lading date is standard, but presentation-based tenors can start later.
- Ask for the buyer’s bank name up front — a stronger issuing bank means cheaper discounting.
- Build document compliance in from the start; discrepancies cost you both time and fees.
Frequently asked questions
What is a sight LC?
A sight LC is a letter of credit under which the issuing bank pays the exporter immediately upon presentation of compliant documents. There is no credit period — payment is due at sight, when the documents prove the shipment. Sight LCs are the fastest form of LC payment for exporters.
What is a usance (time) LC?
A usance LC — also called a time or term LC — lets the buyer pay at a fixed tenor after the documents are presented, commonly 60, 90 or 120 days from the bill of lading date. The exporter ships and presents documents now, but the issuing bank pays only when the tenor matures. That gap is what LC discounting bridges.
What does 60/90/120 days mean in an LC?
It is the credit period of the LC. A 60-day LC means the buyer’s bank pays 60 days after the agreed event — usually the bill of lading date or presentation. The longer the tenor, the more working capital the exporter has locked in transit, and the more the importer benefits from deferred payment.
What is DA vs DP in an LC?
DA means documents against acceptance — the buyer accepts the bill of exchange at the tenor and the documents (and goods) are released, with payment due at maturity. DP means documents against payment — the buyer must pay before the documents are handed over. DP is tighter for the exporter; DA matches usance terms.
How do exporters get paid early on a usance LC?
Through LC discounting: after presenting compliant documents, the exporter sells the usance LC to a financier at a discount, receiving the cash within days instead of waiting out the tenor. The financier is repaid by the issuing bank at maturity. Pricing depends on the issuing bank and country risk — see the LC discounting guide for details.
What is UCP 600?
UCP 600 (Uniform Customs and Practice for Documentary Credits, ICC version 600) is the set of rules that governs how letters of credit are issued and examined worldwide. It defines documentary compliance, so both the sight/usance mechanics and the document requirements of your LC operate under it.
Should I negotiate 60, 90 or 120 days as an exporter?
It depends on your working capital and the buyer. Shorter tenors mean faster payment; longer tenors win deals but lock up cash. If you accept a long tenor, plan to discount the LC — the cost of discounting is usually far lower than the cost of a cash-flow crunch. Check whether your buyer’s market supports discounting before you agree.
Who bears the cost of an LC?
Mostly the importer, who pays the issuing bank’s opening commission — commonly a small percentage of the LC value per quarter ⚠️ — plus advising and negotiation charges. Discounting charges, if the exporter discounts the usance LC, are borne by the exporter as the price of early cash.
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