A Letter of Credit is a written promise by a bank to pay for goods a buyer purchases from a seller. LC Discounting is a way a seller gets paid immediately even if the buyer wants a longer term for payment. The financial option to discount a letter of credit is a strategy that businesses will sometime use as a means of generating cash today for a letter of credit that is slated to be honored at some point in the future. Essentially, the approach used to discount a letter of credit is similar to factoring an invoice, in that the seller who is awaiting payment for goods that have been shipped and received by the buyer can approach his or her bank to receive an advance of funds that is near the total worth of that letter of credit (LC). This allows the seller to enjoy the proceeds from the purchase now rather than later, using the money for whatever purpose is needed.

Source: LC Discounting

In a Business Deal what is LC Discounting?

Letter of credit isn’t a cheque but rather it’s a conditional payment enterprise of the activity bank. For this reason as a beneficiary initial of all you’d prefer to meet your obligations under a Letter of Credit before considering yourself to be eligible of the activity bank’s payment.

Beneficiaries can fulfill their obligations under a letter by making yielding shows. Once activity bank receives the yielding presentation from the beneficiary it should to honor, that means;

• To pay at sight if the credit is on the market by sight payment,
• To incur a credit enterprise and pay at maturity if the credit is on the market by credit,
• To accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is on the market by acceptance.

I would like better to summarize what I even have explained on high of everywhere once more as results of most of the exporters suppose that they’ll discount a letter of credit as shortly as they have received it from their banks. This belief isn’t correct the smallest amount bit. You’d prefer to produce a yielding presentation therefore on receive any reasonably payment under a letter of credit. No yielding presentation no payment under letters of credit.

Source: Letter of Credit Discounting