Here is a step by step process of how sight letter of credit works:Ī buyer who needs certain goods contacts a supplier and gets a quote for the requirement, and confirms the deal. The banks or financial institutions generally take between 5 to 10 business days to process these documents.

The process of submitting and verifying the documents is known as the sighting process, after verification the document is called the Sight LC. Once the goods or services reach the buyer, the buyer has to pay the financial institution that provided the Sight LC.

However, with the help of LC at sight or Sight LC, he can avoid the payment default risk.Ī sight letter of credit is a document which stands as a proof of payment in return of the goods or services to be released for the transportation by the seller. The buyer pays his bank within a grace period of 30, 60, or 90 days, based on the terms and conditions mentioned in the LC.Īs the seller has to wait for 30-90 days to receive its payment, such transactions increase the risk for the business. This is because these documents are sent to the buyer’s bank and verified again. There is a significant gap between the seller furnishing the documents to the bank and the bank processing the payment. The seller ships the products and furnishes the necessary documents to the bank, upon which the bank pays the seller the full amount mentioned in LC. The seller’s bank verifies the LC before he ships the goods. The buyer asks his bank to issue a letter of credit to the seller or the beneficiary. A letter of credit (LC) is a financial document wherein banks act as an intermediary between a buyer and a seller to ensure the fulfillment of the transaction.

What is the meaning of letter s