Usance credit is a form of letter of credit that permits the recipient to obtain payment at a future date, typically after a specified period of time. It is a commitment made by a bank to compensate the recipient on behalf of the client, provided that specific requirements are fulfiled. This form of credit is commonly employed in global commerce, particularly when the buyer and seller are located in different countries and require additional time to finalize the transaction.
Usance credit, also known as a time letter of credit, is a form of letter of credit that enables the beneficiary to receive payment at a later date, typically after a specified period of time. This type of credit is often utilised in international trade to facilitate transactions between buyers and sellers without the need for upfront payment for goods. For instance, a company in the United States may use usance credit to purchase goods from a supplier in China, allowing the supplier to ship the goods and receive payment from the bank, with the company having a set period to repay the bank.
Usance credit refers to a type of letter of credit that allows the buyer a specified period of time, known as the usance period, to pay for the goods or services purchased.
Under usance credit, the seller ships the goods and presents the necessary documents to the buyer’s bank. The bank then examines the documents and, if they comply with the terms of the credit, pays the seller. The buyer is then given a specified period of time to reimburse the bank.
The usance period can vary depending on the agreement between the buyer and seller, but it is commonly 30, 60, 90, or 180 days.
Yes, there are risks involved. The buyer may default on payment, causing financial loss to the seller. Additionally, there may be risks associated with the shipment of goods, such as damage or loss during transit.
Yes, usance credit can be extended or amended, but it requires the agreement of all parties involved, including the buyer, seller, and the banks.
If the buyer fails to pay within the usance period, the seller may take legal action to recover the outstanding amount. This may involve initiating a lawsuit or pursuing other debt collection methods.
Yes, usance credit is commonly used for international transactions, as it provides a secure method of payment for both the buyer and seller.
Yes, there are typically fees associated with usance credit, including bank charges, document handling fees, and interest charges if the buyer fails to pay within the usance period.
Usance credit can be revoked or canceled, but it requires the agreement of all parties involved. This may occur if there is a breach of contract or if the buyer and seller mutually agree to cancel the transaction.
Usance credit is governed by international trade laws, as well as the laws of the countries involved in the transaction. It is important to consult with legal professionals familiar with international trade and banking regulations to ensure compliance.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 16th April 2024.
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