Documentary Collection or Import Financing for Small Companies in the US
Cash Against Documents Funding or Documents Against Payment (D/P) Financing Is a Robust Form of Cash on Delivery (COD).
Cash Against Documents Financing is commonly for international transactions. For example, if goods are from China to America, the company (or their funding source on their behalf) importing the goods must pay the invoice in full before they can take possession of the merchandise. The process is reasonably straightforward, and the exporter will fill the order and ship it. The similar Documents Against Acceptance (D/A) utilizes a term or time draft.
There are several ways this transaction can occur. For those new to international trade, we will use the term FOB which stands for Free On Board. An exporter from China can offer to sell you sunglasses. Perhaps the exporter tells the purchaser (you) that if they buy the sunglasses FOB China then the purchaser pays $5 a pair. Meaning that the seller has to transfer funds before shipment of the items. Also pays for the merchandise and shipping costs sight unseen but can inspect for quality and quantity.
The other option may be that the exporter offers the purchaser the ability to buy the sunglasses FOB Miami, FL USA for $17 a pair. Meaning the purchaser may physically inspect the goods before transferring the money, and the seller has paid the shipping, import duties, and other costs.
Of course, FOB China involves more risks. Experienced logistics consultants can help you weigh the risks. These risks include the credibility of the exporter, the quality of merchandise, the speed of delivery, etc. WIP Funding has deep experience versus other banks and financing companies which may not have the same experience with this type of transaction.
In any event, once the shipping decision is final, the exporter of the goods prepares paperwork. This will include a Bill of Exchange, manifest, inspection certificates, proof of tariff payment and other required documents. There is a need to forward these documents to the exporter’s bank or finance company. After, the exporter’s bank will then send the documents to the purchaser’s finance company for review.
During this process, the exporter retains his ownership of all goods being exported. Completion of the process will only be when the payment is already in full. Once the payment is complete with a bank’s verification, the appropriate documents are released to the purchaser. Fees are commonly associated with these types of transactions. Payment for these fees are either from the exporter, importer or sometimes split between both.
WIP Funding can provide Cash Against Docs Financing for your business. We have the experience to handle these transactions. Many banks do not have this expertise. There is a greater chance that a mistake will occur when using a bank without trade finance experience instead of a funding company that deals with these transactions on a daily basis. Not only can we help with financing, but WIP Funding has a wealth of import/trade knowledge that we bring to the table.