| Method | Time of Payment | Goods Available
To Buyer | Risk To Seller | Risk To Buyer |
| CASH IN ADVANCE | Before Shipment. | After Payment. | None if funds are "good", or collected & available in the seller's bank account. | Relies completely on seller to ship the proper goods; Assumes the political and economic risks. |
| LETTER OF CREDIT | | | | |
1. Sight Draft | Upon presentation of conforming documents to the negotiating bank. | After payment unless directly consigned to the buyer (seller surrenders possession). | Very little or none, depending on terms of the letter of credit. | Relatively low in terms of whether shipment has been made. Relies completely on the seller to ship goods described in documents. |
| 2. Time Draft | After shipment presentation of required documents, and bank's acceptance of draft due on specified date. Draft may or may not be discountable. | Usually after the bank's promise to pay is established, but before payment. | Very little or none, depending on terms of the letter of credit. | Relatively low in terms of whether shipment has been made. Relies completely on seller to ship goods described in documents. |
| COLLECTION | | | | |
1. Sight Draft
Document Against
Payment, D/P | Usually soon after the local bank notifies the buyer of receipt of documents. | After payment, unless directly consigned to the buyer (seller surrenders possession). | Many risks such as buyers integrity and standing and political and economic instability. | Relatively low in terms of whether shipment has been made. Relies completely on seller to ship goods described unless the buyer is allowed to inspect goods before payment (rare). |
2. Time Draft
Document Against
Acceptance, D/A | Expected on the maturity date of the draft. | Before payment, but after the buyer accepts the draft. | Reliance on the buyer to pay the draft when due. Other risks are the same as for a sight draft, except the goods have already been released. | Relatively low in terms of whether shipment has been made. Relies completely on seller to ship goods described unless the buyer is allowed to inspect goods before payment (rare). |
| OPEN ACCOUNT | As agreed. | Before Payment. | Seller relies completely in the buyer to pay the account as agreed. Political and economic
risks. | None. |
| 