Chapter 7 - METHODS OF PAYMENT IN TRADE FINANCE

Payment Methods in Trade Finance:

In international Trade there are risk to both the buyer and the seller. The seller runs the risk of payment not being made after the goods have been delivered and the buyer runs risk of not getting the goods or getting of different type after the payment has been effected.

The amount of risk which the buyer or the seller faces will depend upon the terms and conditions of the payment.

The risk will depend upon how closely the time of payment could be matched with the time of release of goods.

The following are the various recognized ways of effecting payment in international Trade:

1.       Advance Payment

2.       Open Account

3.       Documentary Collection

. Against Payment

. Against Acceptance

4.       Documentary Credit or Letter of Credit

. Against Payment

. Against Acceptance