Important Disclosure. For corporate sponsors and accredited investors. Not a public offer. Local restrictions may apply. Prepared by FG Capital Advisors, August 2025.
UPAS Letters of Credit: What They Are, Pricing & LC Refinancing
UPAS stands for Usance Payable At Sight. The exporter is paid at sight on compliant presentation, while the importer repays later at a fixed usance (for example 90–180 days). The nominated or confirming bank funds the gap. You get shipment moving without starving working capital, and the seller gets cash now instead of waiting out tenor. Most UPAS LCs are issued under UCP 600, with reimbursement handled per URR 725 where a reimbursing bank is appointed.
Why Sponsors Use UPAS
Importer Benefit
Defers outflow to match inventory conversion or receivable collection. Interest and charges sit with the applicant per LC terms.
Exporter Benefit
Gets sight payment against clean docs, with bank risk instead of buyer risk for the tenor window.
Bank/Confirmer Angle
Priced as a funded trade asset with clear maturity, often risk-participated or insured for limit relief.
When It Fits
Seasonal imports, commodity flows, OEM parts, and any shipment where cash-flow timing matters more than absolute fee minimization.
How UPAS Payment Flows Work
LC must state that the bank pays at sight to the beneficiary while the applicant bears usance interest and charges through maturity.
Typical Pricing Components
| Component | How It’s Quoted | Drivers |
|---|---|---|
| Confirmation (if applied) | Per annum on LC face during risk period | Issuing bank rating, country risk, tenor, currency |
| UPAS Funding Margin | SOFR (or local benchmark) + spread for the usance days | Bank capital, corridor, collateral/insurance, amount |
| Advising / Amendment / Messaging | Flat bank tariff charges | Channel, complexity, number of amendments |
Importers also see local taxes or stamp duties where applicable.
Worked Scenarios
| Case | Face Value | Tenor | Key Terms | Indicative Year-One Cost |
|---|---|---|---|---|
| UPAS With Confirmation | USD 5,000,000 | 180 days | Confirm 0.7% p.a.; Funding SOFR+3.0% for 180d; Fees flat | ~USD 100k–120k equivalent (mix of confirm + usance interest) |
| UPAS Without Confirmation | USD 3,000,000 | 120 days | Funding SOFR+2.5%; no confirmation; standard advising | ~USD 25k–35k usance interest + small flats |
| Cross-Currency UPAS | EUR 4,000,000 | 150 days | EUR benchmark + 2.8%; optional FX hedge on importer side | Rate-driven; add hedge cost if taken |
Figures are directional. Final terms depend on credit, limits, country, and market rates at issuance.
LC Refinancing: Options When You Need Longer Cash Flow
UPAS At Issuance
Build UPAS into the LC so the exporter is paid at sight and the importer repays at maturity. Cleanest path if negotiated early.
Post-Shipment Discounting
For usance LCs with accepted drafts, the bank discounts to pay the exporter early. Importer repays at stated maturity.
Sight LC → Import Loan (Trust Receipt)
If the LC is sight only, some markets allow a post-import loan or trust receipt to stretch the payment after goods land.
Confirmed or Insured LC Refinance
Use confirmation or a trade credit insurance wrap to unlock cheaper funding or distribution when limits are tight.
Risk Participation
Distribute part of the funded exposure to participating banks to improve limit availability and pricing.
Cross-Currency Overlay
Fund in the cheapest benchmark and overlay an FX swap if the LC currency differs from your cash-flow currency.
Documentation Essentials
Clear UPAS Clause
State that the nominated/confirming bank pays at sight while reimbursement from the applicant occurs at maturity, with interest and charges for the applicant’s account.
Rule Set & Reimbursement
Most UPAS LCs run under UCP 600. If a reimbursing bank is used, reference URR 725. Define maturity calculation and cut-offs.
Presentation Terms
Keep documents tight and aligned with the sales contract. Avoid vague terms that trigger refusal and delays.
Charges Allocation
Spell out who pays confirmation, funding interest, advising, and amendments. Avoid “to be arranged later.”
Key Risks & How To Control Them
Country/Bank Risk
Use confirmation or insurance where the beneficiary won’t take issuing bank risk. Check live limits before you draft.
Rate & FX Risk
Price the usance against a benchmark and hedge where material. Don’t leave FX until after shipment.
Operational Slippage
Assign one drafting owner, set turnaround SLAs, and pre-agree discrepancy cures to avoid stuck documents.
Mismatch to Cash Cycle
Pick tenor that matches your inventory and AR. Paying early while stock sits in customs is how margins die.
Why Sponsors Hire FG Capital Advisors For UPAS & LC Refinancing
Bank & Confirmer Matchmaking
We source issuers, confirmers, and discounting banks that actually hold corridor limits today, not last quarter.
Pricing Levers, Not Guesswork
We run multiple paths — confirmation, insured LC, risk participation — so you don’t bet the deal on a single quote.
Documentation That Collects
Clean UCP 600 text, workable presentations, and clear reimbursement so sight really pays at sight.
Close-Time Discipline
Tight drafting ownership, fixed review windows, and escalation routes. Less email ping-pong, faster issuance.
Need A UPAS LC Or LC Refinancing?
Share your corridor, instrument, tenor, and target ship dates. We’ll map the funding path and drive it to issuance.
Start Your Trade Finance RequestUPAS & LC Refinancing — FAQs
Is UPAS a Sight LC or a Usance LC?
Operationally it pays the exporter at sight, but for the applicant it behaves like a usance LC with repayment at maturity. The LC text must spell this out.
Who Pays The Interest And Fees?
Normally the applicant. The LC should state that usance interest, confirmation, advising, and amendment charges are for the applicant’s account unless agreed otherwise.
Can I Convert A Sight LC Into UPAS After Issuance?
If the bank offers post-import finance (trust receipt/import loan) or agrees to refinance on acceptance, you can mimic UPAS economics even if the LC text is sight-only.
Do I Need Confirmation?
Only if the beneficiary won’t take issuing bank/country risk. Confirmation also helps distribution and can tighten pricing.
Which Rules Apply?
UPAS commercial LCs usually reference UCP 600. If a reimbursing bank is used, URR 725 applies to reimbursement. Standbys are a different product and typically use ISP98.
What Tenor Works Best?
Tenor should track the cash-conversion cycle: inventory days + shipping + AR days. Most programs run 90–180 days, extendable case by case.
Disclaimer. Pricing and structures are indicative and subject to credit approval, limits, tenor, currency, and jurisdiction. FG Capital Advisors provides advisory and arrangement services only.
