Trade Finance check0 / 1 answered · 0 correct
Check 1
What does discounting mainly do for the beneficiary?
Discounting Usance and Deferred Payment
See how future LC payment obligations may be converted into earlier cash.
Future payment obligation
A usance/deferred-payment LC can create a payment obligation due at a future maturity after a complying presentation and any required acceptance/incurrence.
Discounting
A bank or financier may pay the beneficiary earlier at a discount and receive the future payment at maturity, if it accepts the issuing/confirming bank and transaction risk.
With or without recourse
The beneficiary may retain some risk under a recourse structure. A true without-recourse structure transfers more risk to the financier and usually depends heavily on the bank obligation.
Not all usance credits are equal
Issuer, confirmation, documents, maturity wording, country, compliance and legal enforceability affect whether discounting is available.
Remember thisA future bank payment obligation can be financeable, but the financier still chooses whether to buy or advance against it.
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