Case study · Practitioner

Case: 90-day Usance LC

A seller wants cash now even though the documentary credit pays 90 days after the agreed trigger.

Contract

Buyer and seller agree payment by irrevocable 90-day documentary credit.

Issuance

Buyer’s bank approves facility and issues MT700; seller’s bank advises it.

Review

Seller checks 46A documents, shipment/expiry dates, drawee/availability and tenor before shipment.

Shipment

Seller ships and prepares a complying presentation.

Examination

Bank accepts/incurs the future payment obligation according to the credit mechanism.

Financing request

Seller asks its bank to discount the future bank obligation.

Bank decision

Financier evaluates issuer, country, maturity, documents, compliance and whether it takes recourse.

Early cash

If approved, seller receives discounted proceeds; financier receives maturity value later.

What this case teaches

Usance is payment timing, not a separate SWIFT instrument.
A future bank obligation may be financeable but is not automatically discounted.
Document compliance comes before reliable maturity financing.

Before looking only at the outcome, separate the instrument from the surrounding transaction. Use these questions every time.

Instrument
What undertaking, payment method or document is actually involved?

Rules & deadline
What rules, expiry, maturity or presentation deadline controls the next step?

Evidence
Which facts are independently verified and which are only counterparty claims?

Bank action
What must the bank authenticate, approve, examine or settle?

Remember: a case illustrates a method of thinking. A real bank may require different documents, approvals or procedures.

Case check0 / 1 answered · 0 correct

What creates the financing value in this case?