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Letters of Credit Comparison Chart
Method of Payment
Timing of Payment to Seller
Goods Available to Buyer
Risk to Seller
Risk to Buyer
Sight Letter of Credit*
When complying documents are presented
When letter of credit is settled
Very little, as long as documents comply with the letter of credit
Possibility of fraud
Time (essence) Letter of Credit*
Upon maturity of time draft or discounting of Banker’s Acceptance
Upon Bank’s Acceptance of the Time Draft
Very little, as long as documents comply with the letter of credit
Possibility of fraud
Documentary Collections
Method of Payment
Timing of Payment to Seller
Goods Available to Buyer
Risk to Seller
Risk to Buyer
Documentary Collection with Sight Draft
Upon presentation of sight draft
After payment
Possibility of non-payment of draft
Fraud or misunderstanding regarding goods
Documentary Collection with Time Draft
Upon maturity of time draft
Upon Acceptance of time draft
Possibility of non-payment of draft after buyer has possession of the goods
Fraud or misunderstanding regarding goods
*Subject to credit approval.
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