Here again, the bank acts as an intermediary between the buyer and the seller. In this case, however, the seller does not receive payment until after payment has been made to the remitting bank. He therefore has to wait longer for his money than if he were being paid under a documentary credit. Moreover, his risk is not fully covered. When he sends off the goods, he still has no assurance that the buyer or the buyer’s bank will pay; he simply has to trust in their ability and willingness to do so. Documentary collections are therefore normally used only when the buyer and seller are already familiar with each other.

Documentary credits and documentary collections both have their specific advantages

a. Documentary credits
Can be used in transactions with virtually every country in the world.

Rapid access to funds for the seller.

Flexible terms of payment with no impairment of security.

Suitable as an instrument for short-term financing.

Rapid and convenient settlement, often enabling the seller to offer attractive discounts.

High degree of legal security throughout the world.

b. Documentary collections
Substantially better security than settlement on open account

Usually faster than settlement on open account (because the documents are presented through a bank).

Where documents are to be released against acceptance of the bill of exchange in Switzerland, the seller can request an official confirmation in the event of non-payment (protest). This speeds up recovery of the debt and simplifies the collection of interest on arrears.

Few formal requirements; hence great flexibility for both buyers and sellers.

Low cost.

For further information please contact us