arranging payment terms.
Post 1 of 4
I'm starting a small garment factory in Shanghai soon. So whats the norm for payment terms. What does LS on sight mean? I had a business before in Canada and my terms was 10 days and then I'd just go pick up the check. ![[em10]](http://img.alibaba.com/images/eng/style/icon/emoticons_silly.gif)
seems a bit more complicated when your customer isn't around the corner.
seems a bit more complicated when your customer isn't around the corner.
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22 Jun 2007 02:09
Post 2 of 4
Replying to [pauladesigns]:
Would your question be about LC at sight?
Among the various payment options are (i) cash, or (ii) cheque or draft by way of advance payment; payment against collection bills through banks - the bills being on * (demand bills, payable on presentation) or DA bills (delivery of transport documents against acceptance - bill to be paid on maturity); and of course, bills drawn under LCs (sight LCs or acceptance LCs).
Suggest sight LCs as the preferred choice - for both the buyer and the seller.
Would your question be about LC at sight?
Among the various payment options are (i) cash, or (ii) cheque or draft by way of advance payment; payment against collection bills through banks - the bills being on * (demand bills, payable on presentation) or DA bills (delivery of transport documents against acceptance - bill to be paid on maturity); and of course, bills drawn under LCs (sight LCs or acceptance LCs).
Suggest sight LCs as the preferred choice - for both the buyer and the seller.
22 Jun 2007 20:21
Post 3 of 4
Replying to [pauladesigns]: Thank you for your reply. I'm still not clear about it. I'm going to meet with the bank maybe they can shed some light on how it all works.
09 Jul 2007 01:55
Post 4 of 4
Replying to [pauladesigns]:
I appreciate your feelings. It is much easier to do business with a party just round the corner. Unfortunately, distance and countries' borders make the whole thing far more risky. This makes a sight LC the better bet. I hope your banker has been able to help you out.
The following gives an idea what a sight and a usance LC are all about:
SIGHT LC
This type of credit stipulates that the exporter/beneficiary/seller is entitled to receive proceeds of the credit upon presentation to, and on approval of documents by, the bank that negotiates the export documents. The payment terms are at sight. In other words, the negotiating bank would pay for the documents (if they are in order) as soon as the documents are presented to the bank under the LC.
This type of credit allows the seller to present the set of documents to the nominated bank and obtain funds immediately. The operation is simple and straightforward in nature. It is also the safest because if the documents are in order, you get paid immediately. Of course, the LC issuing bank must finally approve the documents too.
ACCEPTANCE CREDIT
In the case of an Acceptance Credit, a draft is drawn on the applicant/buyer who accepts it for payment on the due date. This is the simplest explanation.
Here. the Nominated Bank, or the Issuing Bank, or the Applicant (the drawee) on whom the draft is drawn is required to accept the usance draft (also referred to as time draft, since it allows the Applicant time between taking delivery of the documents/goods and payment thereof), and pay only on maturity.
[The exporter, therefore, draws a time draft on the issuing or confirming bank, or on the buyer, depending on the credit terms (and 'availability', but that is another story!).]
This is slightly more risky that a sight LC, but still a good bet.
I appreciate your feelings. It is much easier to do business with a party just round the corner. Unfortunately, distance and countries' borders make the whole thing far more risky. This makes a sight LC the better bet. I hope your banker has been able to help you out.
The following gives an idea what a sight and a usance LC are all about:
SIGHT LC
This type of credit stipulates that the exporter/beneficiary/seller is entitled to receive proceeds of the credit upon presentation to, and on approval of documents by, the bank that negotiates the export documents. The payment terms are at sight. In other words, the negotiating bank would pay for the documents (if they are in order) as soon as the documents are presented to the bank under the LC.
This type of credit allows the seller to present the set of documents to the nominated bank and obtain funds immediately. The operation is simple and straightforward in nature. It is also the safest because if the documents are in order, you get paid immediately. Of course, the LC issuing bank must finally approve the documents too.
ACCEPTANCE CREDIT
In the case of an Acceptance Credit, a draft is drawn on the applicant/buyer who accepts it for payment on the due date. This is the simplest explanation.
Here. the Nominated Bank, or the Issuing Bank, or the Applicant (the drawee) on whom the draft is drawn is required to accept the usance draft (also referred to as time draft, since it allows the Applicant time between taking delivery of the documents/goods and payment thereof), and pay only on maturity.
[The exporter, therefore, draws a time draft on the issuing or confirming bank, or on the buyer, depending on the credit terms (and 'availability', but that is another story!).]
This is slightly more risky that a sight LC, but still a good bet.
11 Jul 2007 03:44
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