Payment & trade finance D/A

Documents against acceptance (D/A)

The deferred form of documentary collection: the buyer obtains the documents – and therefore the goods – by accepting a time draft (e.g. 60 days) and pays at maturity. The seller is left holding only the accepted draft and loses control of the goods, so the risk is close to open account; D/A is usually combined with credit insurance or a bank aval guaranteeing the draft.

Related terms

Documents against payment / Cash against documents (D/P – CAD)

A collection method in which the seller sends the documents of title – above all the original bill of lading – through its bank to the buyer’s bank, which releases them only when the buyer pays; it is governed by URC 522. It is cheaper than a letter of credit, but no bank guarantees payment: if the buyer refuses the documents, the goods sit at the destination port and the seller faces demurrage, return freight or a distressed sale. Suitable for trusted, long-standing relationships.

Usance (deferred-payment) letter of credit

A letter of credit under which payment falls due at a set time after complying presentation – for example 90 or 180 days after the bill of lading date. It finances the buyer, who can process and sell the goods before paying, while the seller can obtain cash early by having the bank discount the accepted claim (forfaiting). The interest for the usance period and the discount cost should be built into the price.

Trade credit insurance

Insurance of the seller’s receivables from credit sales against the buyer’s insolvency or protracted default (commercial risk) and against political risks such as war or transfer bans. The insurer sets a credit limit for each buyer and, after a loss, usually pays 85–95 % of the debt. Providers include export credit agencies such as Türk Eximbank and private insurers such as Allianz Trade, Coface and Atradius. A policy also makes bank financing easier and cheaper.

Explained in the trade handbook

Trade handbook