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Use a UPAS letter of credit when the seller needs cash at shipment and the buyer needs time to pay. Use a UPAU letter of credit when both sides accept payment at maturity, or when the seller is happy to discount the credit later if it needs cash sooner.
This guide explains how each structure works, how they compare, who does what in the transaction, which costs to budget for and which documents keep the presentation clean.
UPAS, usance payable at sight. The seller is paid at sight once it presents compliant documents. The buyer repays the bank at the end of the usance period, typically 30 to 180 days. The bank, or a financier behind it, funds the gap, so the seller gets cash and the buyer gets credit. Our page on the 90-day usance LC with optional UPAS shows a typical structure.
UPAU, usance payable at usance. The seller is paid at maturity, and the buyer pays at the same date. If the seller needs cash earlier, it can ask a bank to discount the accepted draft or deferred payment undertaking, as explained in our guide to letter of credit discounting.
| Feature | UPAS LC | UPAU LC |
|---|---|---|
| Seller is paid | At sight, against compliant documents | At maturity, unless it discounts |
| Buyer pays | At the end of the usance period | At the end of the usance period |
| Who funds the gap | The bank or a financier, usually at the buyer's cost | The seller, or a discounting bank at the seller's cost |
| Best suited to | Sellers that need cash now, buyers that need time | Sellers with the balance sheet to wait |
| Main cost drivers | Interest for the usance period, issuance and any confirmation | Acceptance or deferred payment commission, issuance, any confirmation and any discount |
Issuing bank. Issues the credit on the buyer's behalf and undertakes to pay against compliant documents.
Advising bank. Authenticates the credit and passes it to the seller.
Confirming bank. Adds its own payment undertaking when the seller wants protection against the issuing bank or its country. See our comparison of confirmed and unconfirmed letters of credit.
Nominated bank. Examines the documents and pays the seller at sight under UPAS, or accepts and, if asked, discounts under UPAU. Our guide to issuing, advising and confirming banks covers each role in more detail.
Agree the contract. Buyer and seller agree the goods, Incoterm, usance period and the UPAS or UPAU structure, with the credit subject to UCP 600.
Issue the credit. The buyer applies to its bank, the parties approve the draft wording, and the issuing bank sends the credit by SWIFT to the advising bank.
Ship and present. The seller ships and presents the documents the credit requires.
Examine and pay. The bank checks the documents. Under UPAS the seller is paid at sight. Under UPAU the bank accepts the draft or undertakes to pay at maturity.
Settle at maturity. The buyer pays the bank at the end of the usance period, along with any agreed interest and charges.
Opening, advising and SWIFT charges, plus amendment fees if the credit changes after issuance.
Priced on the risk of the issuing bank and its country, and only payable when the seller requires it.
Under UPAS, interest for the usance period, usually charged to the buyer. Under UPAU, only if the seller discounts.
Charged by the bank that accepts the draft or gives the deferred payment undertaking, mainly relevant to UPAU.
Final pricing depends on the issuing bank, the countries involved, the tenor and the amount. Ask for every fee to be itemised before the credit is issued.
The seller is only paid if the documents comply with the credit. Expect a commercial invoice matching the credit exactly, a transport document consistent with the Incoterm, a packing list, an insurance document where the Incoterm requires one, and any inspection certificates or approvals the credit names. Our guide to common LC discrepancies under UCP 600 lists the errors that most often delay payment.
Send us your contract, the amount, the usance period and the countries involved. We will recommend the structure, tell you whether confirmation is likely to be needed and set out the scope of work and our fee.
A UPAS (usance payable at sight) letter of credit is a usance LC under which the seller is paid at sight against compliant documents, while the buyer repays the bank at the end of the agreed usance period. The bank funds the gap.
A UPAU (usance payable at usance) letter of credit pays the seller at maturity, at the end of the usance period. The seller can still get cash earlier by asking a bank to discount the accepted draft or deferred payment undertaking.
Both pay the seller at sight. Under a sight LC the buyer reimburses the bank immediately, while under a UPAS LC the buyer gets credit until the end of the usance period.
Both are documentary credits and are normally issued subject to UCP 600. ISP98 is designed for standby letters of credit and is not the usual choice for these structures.
No. Financely is an advisory and arranging firm, not a bank or lender, and does not issue letters of credit. We structure trade finance and arrange it with banks from our network of more than 12,700 verified capital providers.
This guide is for general information only and does not constitute legal, tax or investment advice. Financely is an advisory and arranging firm, not a bank, lender or broker-dealer, and does not issue letters of credit. All engagements are subject to KYC, AML and sanctions screening. Banks make their own credit decisions and set final pricing, and no outcome or timeline is guaranteed.
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Recent mandates include a USD 150m revolving credit facility and a USD 12m acquisition closed in 21 days. We are an advisory and arranging firm, not a lender, and you close directly with the lender.
Financely is an advisory and arranging firm, not a lender or broker-dealer. All financing is subject to KYC, AML, due diligence and lender credit approval. No outcome or timeline is guaranteed.