International Payments

Choosing an International Payment Method
If you are an exporter, your preferred method of payment will be "Cash in Advance" of shipment; whereas if you are an importer, you would probably prefer "Open Account", allowing you to pay upon receipt of the merchandise. Unfortunately, neither of these methods will work all of the time, and you may need to consider other options available that more evenly balance the commercial and political risks, such as:

• Standby Letters of Credit
• Commercial Letters of Credit
• Documentary Collections

Consider these factors when evaluating the use of an alternate method of payment:

The type of product

• Is this a discretionary item? Or is it an indispensable item such as spare parts?
• Is the product custom built or off-the-shelf?
• Is there a continuous need for the product, or is it an occasional-need item?
• Is it a high-ticket item or merchandise that is lower in value?

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The type of customer

• Are you dealing with a repeat customer who has a good payment record or a new customer with no credit history?
• Is it a large, well-known company or a smaller, owner-operated business?

The type of market

• Is the market highly competitive or are there few suppliers?
• Are alternative products readily available?
• What payment terms are customarily being used?

It is important to note that one payment method is not necessarily appropriate for all situations. In determining payment terms, the above factors should be considered for each individual sale. Applying a blanket policy could result in excessive fees and payment delays. On the other hand, applying too liberal a policy could lead to unforeseen losses. By making a deliberate decision about each transaction, you will be more likely to choose the payment option that best balances your costs against the inherent risks associated with the transaction.

If you have any questions, please feel free to contact the International Banking Department at 1-800-230-5506 (Mon-Fri 8:30am - 5:00pm CST).

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