Usance

Usance (also called tenor) is the customary, allowable period between the date on a bill of exchange and the date that payment is due. In international trade and commercial finance, usance specifies a deferred payment term that varies by country and practice—commonly from about two weeks to two months (frequently 30, 60, or 90 days).

How it works in trade

• When goods are shipped under a bill of exchange or a letter of credit, the seller presents documentation to demand payment. Under sight terms the buyer pays immediately; under usance terms payment is deferred for the agreed period from the bill date.
• Usance gives buyers time to receive, sell, or otherwise realize cash from the goods before paying the seller.
• The seller retains credit risk for the usance period unless they discount the bill with a bank (sell it at a discount) or obtain financing.

Example

A manufacturer imports raw materials and receives a shipment today. The supplier issues a bill dated today with 30 days usance. The importer has 30 days from the bill date to pay the supplier—in that interval they can process and sell finished goods or arrange financing.

Usance as a financing/interest concept

The term can also refer to the interest or profit charged for providing credit. Historically the word is related to usury and to the economic “use” of goods or capital: lenders charge compensation for deferred payment or for lending funds.

Practical implications

• Buyers benefit from improved cash flow and working capital flexibility.
• Sellers may need to accept longer payment cycles or secure financing to bridge cash needs.
• Financial institutions facilitate usance transactions by discounting or confirming credits and taking on payment/credit risk.

Key takeaways

• Usance = deferred payment period (tenor) on a bill of exchange or credit instrument.
• Typical durations vary; common commercial terms are 30–90 days.
• It affects cash flow, credit risk, and the need for financing in international trade.