Advance Payment is a trade system where the buyer places funds at the disposal of the seller before shipment of the goods/services are done.
- Payment is made before goods are delivered to the buyer
- This method of payment is risky
- Banks are involved only in the transfer of funds
- Less expensive as compared with Letters of credit
- Quick and secure means to transfer funds abroad
- Customers have access to foreign currency at very competitive rates
- Encourages the seller into a long-term trade relationship