Appendix III – More about Modes of Payment
SIGHT DRAFT (=COD) - DOCUMENT AGAINST PAYMENT
- Original shipping document attached Ţ CB (collecting bank)
- Original bill of lading made to the order of the shipper and endorsed by him
blank, or to the order of CB
- Notification to drawer of draft about payment
TIME DRAFT
- Like sight drafts but paid X days after acceptance
- The CB holds and presents for payment
BANK GUARANTEE dependent on underlying obligation or independent (=note)
- Bid bonds
} dependent
- Performance bonds } dependent
- Advance Payment bonds } dependent
- Payment Bonds
} independent but with recourse and stoppable by court injunction
LOCs
DLC - Documentary
FLC - Financial
SLC - Standby
- CLEAN (Self-contained)
- REGULAR (Dependent on an event)
FACTORING AND FORFAIT / EMC
COLLECTION
CREDIT PROTECTION
FINANCING (=LOAN / Credit line) on Approved Accounts
Recourse Factoring: Collection + Financing
How to choose a Factor?
Profile of users of Factoring
Restricted access to credit
High or low net worth
Satisfied customers
Credit - worthy customers
Successful products / services
Factoring Services
Conventional Min 2 ˝ %, 3 days
(5% per 30 day invoice)
Weekly agings, daily collection reports
Credit services, fees prorated daily,
2-weekly reserve releases, 24 hour funding
No hidden fees / long term contracts
Debt Consolidation Payment to creditors when company is in default
Maturity
On pre-approved account debtors
Financing / Sale - Leaseback (for bankrupt companies) including equipment
How does it work
Bring invoice + delivery slip
Receive upto 80% of the face amount
Receive the balance (reserve) when the invoice is paid
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