Banking, Trade Finance & Export Payments
Don’t lose potential business to competitors by overlooking different export payment options which could be attractive to your international buyer. Explore several export payment methods and find the one best suited to your needs.
Many businesses new to selling products overseas expect or prefer to be paid in full in advance. While there is zero risk of non-payment if you do business this way, you risk losing business by overlooking competitors willing to offer buyers better payment options. Consider more attractive payment methods.
Methods of Payment
To succeed in today’s global marketplace and win sales against foreign competitors, exporters must offer their customers attractive sales terms supported by the appropriate payment methods. Because getting paid in full and on time is the ultimate goal for each export sale, an appropriate payment method must be chosen carefully to minimize the payment risk while also accommodating the needs of the buyer.
There are a number of methods of payment for international transactions. During or before contract negotiations, you should consider which method in the figure is mutually desirable for you and your customer.
- Bank Letter of Credit (L/C)
- Standby Letter Of Credit (SBLC)
- Bank Guarantees & Counter Guarantees
- Bank Payment Obligation (BPO)
- Documents Against Bank Payment
- International trade presents a spectrum of risk, which causes uncertainty over the timing of payments between the exporter (seller) and importer (foreign buyer).
- For exporters, any sale is a gift until payment is received.
- Therefore, exporters want to receive payment as soon as possible, preferably as soon as an order is placed or before the goods are sent to the importer.
- For importers, any payment is a donation until the goods are received.
- Therefore, importers want to receive the goods as soon as possible but to delay payment as long as possible, preferably until after the goods are resold to generate enough income to pay the exporter.