Glossary term
Advance Payment
Payment made by the buyer before the goods are shipped, placing the commercial risk almost entirely on the buyer.
The seller is paid before shipping. It is the most secure arrangement for an exporter and the least secure for an importer, who parts with money before anything has moved.
It tends to appear where the parties have no history, where the buyer’s country carries payment risk, or where goods are made to order. Buyers who accept it often ask for a guarantee in return, so that the money is recoverable if nothing ships.