A letter of credit is a document issued by a bank guaranteeing that a buyer will pay the correct amount of money to a seller on time. It can be thought of as a cash advance (undertaking). When the supplier sends documents proving the goods were supplied as described in the L/C, the bank either pays the supplier immediately (known as sight L/C), or on a future date after delivery documents are presented (known as usance L/C). The buyer then pays for the order on an agreed date. If the buyer fails to make the full payment, the bank is required to pay the balance.