TT · LC · OA

Payment term cost calculator

Compare payment terms in working capital days and dollars. Pick your cost-of-capital rate; the tool returns days from shipment and the dollar implication for each of 11 standard terms.

Last updated 2026-05-09. Math runs in your browser, no data leaves your computer.

General guidance only, not legal or professional engineering advice. Verify against the cited primary sources (IMDG, REACH, ChAFTA, RCEP, Customs Tariff Act, supplier SDS, etc.) before committing to a shipment, declaration, or contract. Sourzi assumes no liability for outcomes based on these calculators.

Payment terms as working capital lever

Every payment term encodes a number of days the seller waits for payment after shipment. The seller funds those days at its cost of capital; the buyer benefits from the credit at zero interest. The math is symmetric and meaningful: at 6% annual cost-of-capital, OA 60 costs the seller about 1% of order value; at 12% factor-financing rate, the same OA 60 costs nearly 2%. For routine 35,000 USD chemical containers, that is 350 to 700 USD of seller-side cost per shipment.

The negotiation usually moves on price. Seller offers OA 60 at a 1.5% price premium versus T/T upfront; buyer accepts because their working capital cost is higher than the 1.5% premium. Or seller offers a 2% discount for 100% T/T upfront; buyer takes it because cash flow is fine and a 2% saving on a recurring spend is real money.

For new buyer relationships, payment terms also encode credit risk. T/T upfront is zero risk on the seller side and high risk on the buyer side (cargo not yet shipped). LC at sight balances both. OA terms put credit risk fully on the seller; offered only to buyers with proven payment history.

Frequently asked

What does "working capital cost of payment terms" mean?

When the seller waits for payment, the seller is effectively lending the buyer the cargo value at zero interest. The seller cost of capital (treasury rate, factor financing rate, or marginal-cost-of-funds) times the days of credit times the order value gives the implicit financing cost. A 6% cost-of-capital seller offering OA 60 is paying roughly 1% of order value to fund the buyer.

Why does the buyer prefer longer terms?

Same math reversed. The buyer is borrowing the cargo value from the seller for the term length. For the buyer this is free capital; for the seller it is committed working capital. The price negotiation usually moves: seller offers a lower price for shorter terms or a higher price for longer terms, monetising the working-capital trade.

What is the LC bank-check delay?

When an LC presents, the issuing bank examines documents against the LC text. Examination takes 5 banking days for a sight LC, 5 banking days plus the bill maturity for a usance LC. The 5-day window appears on the days-from-shipment calculation as standard.

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