Availability
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The Usance Credit (Settlement by Acceptance)
•
In a usance credit the beneficiary
presents the required
document package to the bank along with a time draft drawn
on the issuing, advising, or a third
bank for the value of the
credit. Once the documents have made their way to the buyer
and
found to be in order, the draft is accepted by the bank
upon which it is drawn (called an acceptance) and it is
returned to the seller who holds it until maturity.
•
The seller has the option of
selling the acceptance by
discounting its value. The discount charged will be in some
proportion to the time to maturity
of the draft and the
perceived risk associated with its collection. The buyer pays
the draft at maturity to its holder.
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Availability
•
The Deferred Payment Credit (Settlement by Negotiation)
•
In a deferred payment credit the buyer accepts the documents
and agrees to pay the bank after a set period of time.
Essentially, this gives the buyer time (a grace period) between
delivery of the goods and payment.
The issuing bank makes the
payment at the specified time, when the terms and conditions
of the credit have been met.
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