what is lc at sight?

Answer 1

LCs In short:
A claim is made against the bank, rather than the bank's client (LC holder), as opposed to a bank guarantee; Bank guarantee is made by a bank on behalf of a customer, essentially making the bank jointly liable for the customer's purchases.


LC...:
A letter of guarantee from a bank that a buyer's payment to a seller will be received on time in the correct amounts. In the event that the buyer is unable to make payment, the bank will cover the full or remaining amount of the purchase.

...at sight:
LC becomes payable once it is presented along with the necessary documents, e.g. goods orders, shipping documents.
(the bank releases money to the supplier.)

LCs are also used to hedge international transactions to ensure goods upon due inspection, with the bank receiving confirmation of goods shipped, before releasing payments to the supplier.

The hedging occurs when the buyer requests to buy a quantity of foreign exchange at a given rate to meet the supplier's prices before the actual exchange. Say, a purchase order made 3 months ago becomes due in 3 months from today, when the invoice and goods are delivered. 6 months would have passed with the possibility of foreign currency fluctuating, with either buyer or supplier making a foreign exchange gain or loss.