A sight letter of credit (sight L/C) is a letter of credit that the issuing bank or its designated paying bank will pay immediately upon receipt of bills and/or documents that meet the terms of the letter of credit. When using a sight letter of credit for payment, the importer must immediately repay the funds advanced by the issuing bank and redeem the documents after the issuing bank or its designated paying bank pays the beneficiary or negotiating bank, and cannot obtain further financing like a usance letter of credit.
A usance letter of credit (time L/C; usance L/C) is a letter of credit that the issuing bank or its designated paying bank guarantees payment within a specified period after receiving bills and/or documents that meet the terms of the letter of credit. Its main function is to facilitate importer financing. Acceptance letters of credit, deferred payment letters of credit and usance negotiation letters of credit are all usance letters of credit. When using a usance letter of credit, its usance interest or usance bill discount interest and fees are generally borne by the beneficiary.