Usance Letters of Credit

Usance refers to the utilization of economic goods to satisfy needs. In manufacturing, "usance" means "inputs." It is used in "usance bills." This terminology is used in banks in India, when dealing with forex.

SIGHT OR TERM/USANCE Letters of credit can permit the beneficiary to be paid immediately upon presentation of specified documents (sight letter of credit), or at a future date as established in the sales contract (term/usance letter of credit).

This makes the letter of credit a useful financial tool for meeting short-term needs, allowing the recipient of the letter to obtain the credit needed to finance a specific project and hopefully generate enough return from that project to settle the total amount due within the time frame allotted. As with most types of debt instruments, usance letters can be settled in advance if the recipient is able to do so, often with no types of penalties involved.