First time exporter. I am scared of not getting paid after I ship. What is the safest payment method, Letter of Credit or advance.
How do I get paid safely when exporting, LC vs advance payment?
MMahesh Agrawal8mo ago · 260 views
4 Answers
🌾Farmer.in Krishi TeamExpert ✓8mo ago
The safest payment for you as the seller is advance payment, where the buyer pays before you ship, but few serious buyers agree to 100 percent advance, so the common safe middle ground is a confirmed irrevocable Letter of Credit (LC). With an LC, the buyer's bank guarantees payment once you present the shipping documents exactly as stated in the LC, so document accuracy is critical. A confirmed LC adds your own bank's guarantee on top, which is safer if the buyer's country or bank is risky. Documents against Payment (DP) is riskier and Documents against Acceptance (DA) or open account is the riskiest for a new exporter, because you ship and then wait for the buyer to pay. For early deals, ask for some advance plus a confirmed LC for the balance, and consider ECGC export credit insurance to cover buyer default. Never send goods on just trust to a new buyer, and never pay the buyer any fee to release your payment, that is a scam. Talk to your bank's trade finance desk before agreeing terms.
DDeepak Mehta8mo ago
For my first three buyers I insisted on advance for a part and LC for the rest. Lost one buyer who refused, but the ones who agreed were genuine. Genuine buyers understand a new exporter being careful.
SSunil Bansal8mo ago
LC sounds safe but be very careful with the document wording. My bank rejected my first set for a small mismatch in description and payment got delayed. Read the LC line by line before shipping.
RRitu Sharma7mo ago
Take ECGC cover, it is worth the small premium. Saved a friend when a buyer abroad went bankrupt.