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What are my payment options for doing business overseas?
There are four main options.
- Payment in advance is the least risky for a seller in that you receive payment prior to shipping goods and assume no financing costs. However, many buyers won't want to pay in advance.
- A letter of credit is one of the safest ways to get paid by overseas customers in that your bank is assuring payment, but, as a buyer, it is the equivalent of a loan for which you must apply.
- With documentary collection, payment becomes due when your customer accepts ownership of your goods. Your bank acts as an agent for buyers and sellers, in that the bank maintains control of the title documents, but it does not contain an assurance of payment by the bank.
- Open account is the same as in domestic trade in that a seller agrees to grant a buyer "credit" and the buyer agrees to make payment once the conditions of the sale are met. It has the highest risk of non-payment for a seller.
Deciding on which option to use can be complex and involve many different factors. Please contact a TD Bank Global Trade Finance representative at 800-937-8226 to find out which option is best for you.