Types of Payments

Unit 4.6-Types of Payments

Documentary credits and/or letters of credit are banking tools used to alleviate various levels of risk related to international business transactions. In addition to the many forms of credit-- including but not limited to irrevocable, confirmed, transferable, revolving, and standby--with each credit instrument the timing for payment must be identified. These include sight, deferred payment, acceptance and negotiation. In addition there is also much flexibility for a buyer and seller to negotiate the terms for payment. To understand this process, an international manager must be comfortable with the terminology and definitions of the parties and actions associated with this banking instrument, including but not limited to terms such as: applicant, beneficiary, issuing bank, advising bank, discrepancy and amendment.

Unit Objective

The goal of this material is to introduce you to the types of payment opportunities for international business transactions and the ways each affects the timely payment for the sale of goods and/or services, including an understanding of how and when each type of payment is utilized with the methods of payment available for international transactions. By the end of this unit you will be able to

• identify the types of payments available for international transactions.
• identify how each type of payment can be used.
• identify how each type of payment affects the collections of funds.

Unit Outline

• Introduction
• Types of Payments
• Negotiation
• Summary
• Resources
• Activities
• Assessment

Correlation: Materials from this unit correlate with NASBITE CGCP's Knowledge Statement 04/04/06: Knowledge of types of payment (e.g., sight, deferred, acceptance)

Next