| Situation |
Primary Objective |
Instrument To Prioritise |
| Seller requires certainty of payment on shipment |
Assured settlement against documents |
Letter of Credit under Uniform Customs and Practice for Documentary Credits Publication Number 600; add confirmation where issuer or country risk is high; enable discounting for deferred terms |
| Buyer requires protection against non-delivery or non-performance |
Refund or performance support on demand |
Standby Letter of Credit under International Standby Practices Publication Number 98 or demand guarantee under Uniform Rules for Demand Guarantees Publication Number 758 with precise draw language |
| Buyer needs tenor and the seller wants cash at shipment |
Sight payment to seller and deferred payment by buyer |
Usance Payable At Sight structure or usance Letter of Credit with confirmed discount at sight |
| Known counterparty and stable route |
Lower cost with basic control |
Documentary collection documents against payment or documents against acceptance; or insured open account with export credit insurance |
| Cash locked in receivables and stock |
Liquidity without waiting for customer payment |
Receivables finance or factoring; borrowing base on receivables and inventory under collateral management |
| Exporter holds bank-avalised paper or receivables under a Letter of Credit |
Immediate cash and risk transfer |
Forfaiting on a non-recourse basis |
| Project or supply contract with deposits and milestones |
Refund or performance protection and orderly release |
Advance payment guarantee, performance guarantee, retention guarantee; or a Standby Letter of Credit |
| Currency mismatch between payables and receivables |
Protect cash flows from exchange rate swings |
Forward contracts and options aligned to shipment and maturity dates; present the hedge in the credit file |