At Sight Payments: Advantages and Disadvantages

What Is At Sight?

At sight is a payment due on demand where the party receiving the good or service is required to pay a certain sum immediately upon being presented with the bill of exchange. This type of payment is also known as a "sight draft" or a "sight bill."

Key Takeaways

  • At sight is a form of payment due on demand when presented with required documentation.
  • A seller might place an at-sight clause in a contract if the buyer has missed payments in the past, and is deemed to have a higher risk of default.
  • At-sight transactions are common when shipping goods overseas.
  • Exporters might use a sight letter of credit or a letter of credit at sight to guarantee payment upon satisfying the requirements outlined in the letter. 
  • Depending on the time between issuing an at sight and final delivery, there could be currency fluctuation that could affect the final amount paid.

Understanding At Sight

At sight is used most often in legal contracts to describe when payment is to be made. A seller might place an at sight clause in a contract to require full payment upon demand, especially if the buyer has missed payments in the past and is deemed to have a higher risk of default.

At-sight transactions are frequently part of the sale of exports. The seller or exporter of a good might be paid through what is called a sight letter of credit or a letter of credit at sight. Using this method ensures that the seller will be paid at sight upon satisfying the requirements outlined in the letter. This can include, among other things, proof that the goods have been shipped to the buyer.

Payment has already been made by the buyer in this type of transaction. However, the funds will only be released to the seller once the criteria are satisfied.

The seller typically must take the bill of lading (BoL) after they have resolved all the shipping matters necessary with customs for export transactions under a letter of credit at sight. The exporter would then take the BoL and present it along with the letter of credit and other required documentation to the bank for payment to be released.


The timing of the release of payment can create liquidity issues for businesses that have not planned for the submission of documentation to receive payment.

Advantages and Disadvantages of at Sight

This type of at sight transaction offers protections for both the buyer and seller because payment is guaranteed to the seller but is only released once the goods are accounted for on behalf of the buyer.

Companies selling goods to volatile nations generally prefer to be paid promptly. They are mindful that political unrest and financial turmoil could jeopardize future payments, particularly if it leads the buyers’ currency to fall.

In emerging and frontier market economies, it is not unusual for currency valuations to swing wildly, meaning that the local cost of buying something in U.S. dollars (USD), for example, can frequently change. An overseas customer may agree to buy a certain product and pay for it at a later date, only to discover later on that the depreciation of its local currency has made it much more expensive to purchase.

  • Seller advantage for interest reasons

  • Clear provisions for payment and delivery

  • Money tied up while goods are in transit

  • Currency fluctuations during transport

At Sight vs. Upfront Payments

At-sight transactions are different from upfront payments, which are common in retail. Both transactions may require payment on demand.

Upfront payments are made immediately upon ordering goods either in a store or online. The funds are given to the seller at the time the original sale is made.

This differs from at-sight exchanges, which are dependent on documentation being filed to complete the transaction. While there is immediacy for the completion of the funds' transfer, it can be delayed while documentation is gathered for submission.

Example of At Sight

Suppose BlueWing Tech needs to import chips from a Taiwanese company, TaiTech. Before TaiTech ships the chips to Bluewing, both parties agree to use a sight draft as the payment method. After they agree on the terms, TaiTech ships the chips to BlueWing.

Due to the terms of the sight draft, TaiTech will still own the title of goods until payment clears from BlueWing. Once BlueWing receives the goods, they will issue a release of the payment. The payment will then be available to TaiTech, but the title of goods would only be transferred to BlueWing once TaiTech confirms that the payment has cleared. Once it is cleared, the goods then belong to BlueWing.

What Is the Difference Between at Sight and a Letter of Credit?

A sight letter of credit refers to a document that verifies the payment of goods or services, payable once it is presented along with the necessary documents. These types of letters of credit are designed to provide additional protection to parties involved in international trade and include the buyer, the seller, and the issuing bank. It differs from an at-sight letter because an at-sight letter of credit commits itself to pay the agreed amount once the provisions of the letter of credit are met. An at-sight letter of credit is a type of letter of credit.

What Is a Time Draft?

A time draft is a form of payment that is guaranteed by an issuing bank but is not payable in full until a specified amount of time has passed. It differs from a bank draft because there are time limits placed on the draft in the form of credits. Time drafts are commonly used in international transactions as it gives time for the importer to pay for goods received from the exporter.

Can a Bank Draft Bounce?

A bank draft cannot bounce in the same way a check might. When a bank draft is initiated, the funds for the draft are immediately withdrawn from the account of whoever created the draft. The issuing bank guarantees the draft and can only be canceled in the event the draft is lost or stolen.

The Bottom Line

An at sight is an agreement made between a buyer and seller that allows for payment delivery upon receipt of goods and the release of payment. It is commonly used to protect both the buyer and seller during international trade.