Usance is a term used in international finance to refer to the time between the date of a bill of exchange or promissory note and the date it is due for payment. The usance period is the time allowed by the drawee for payment of the bill or note, and is determined by the market conditions prevailing at the time the bill or note is issued. How do you pronounce usance? The word "usance" is pronounced like "yoo-sance". It refers to the time period during which a bill of exchange or promissory note can be presented for payment. What is usance period? Usance period is the time between the date of a bill of exchange and its maturity date. The usance period is the time the drawer has to pay the amount specified in the bill.
How does a usance LC work?
A usance letter of credit (LC) is a type of LC that allows the seller of goods or services to be paid at a future date, typically 30, 60, or 90 days after the goods or services are delivered. The buyer pays the issuing bank a fee for the LC, and the issuing bank in turn pays the seller on the maturity date. The buyer is not required to make any payments to the seller until the maturity date.
Usance LCs are often used in international trade, where the buyer and seller are based in different countries and may have different payment terms. For example, a buyer in the United States may want to purchase goods from a seller in China, but the Chinese seller may require payment in 30 days, while the US buyer may not be able to make payment for 60 days. In this case, the US buyer could obtain a usance LC from a bank, which would pay the Chinese seller on the 30th day and would then be reimbursed by the US buyer on the 60th day.
Usance LCs are also used when the buyer does not have the full amount of the purchase price available at the time of the sale. In this case, the buyer can use the LC to finance the purchase, and will then need to make payments to the bank on the maturity date to repay the loan.
What are the 3 types of bill of exchange? A bill of exchange is a written order from one person (the "drawer") to another person (the "payee"), directing the payee to pay a specified sum of money to a third person (the "bearer") on a specified date.
There are three types of bill of exchange:
1. A sight bill is one that is payable on demand, that is, as soon as it is presented to the payee.
2. A term bill is one that is payable at a specified date in the future.
3. A usance bill is one that is payable at a specified date in the future, plus a specified period of time (the "usance").
Can we discount usance LC? Discounting a usance letter of credit is generally not possible because the credit is not payable until after the expiration of the usance period. However, there may be some circumstances in which a bank is willing to provide financing based on the letter of credit before the expiration of the usance period. In such cases, the bank would typically charge a higher interest rate to compensate for the risk involved.