Documentary collections and documentary credit
International trade with tailor-made risk mitigation.
Companies who build relationships of trade abroad often look for ways to mitigate the risks of international transactions. And that is precisely where ING Trade Finance Services can help.
Documentary credit and documentary collections minimise your risks
You want to be sure you will get paid or that goods and services you have ordered will actually be delivered. There are different ways to build that certainty into the agreement. Documentary credit is the safest. However, it is slower and typically more expensive. Documentary collections are cheaper and faster but offer less certainty.
Which method is right for you?
You should base your choice on the extent of your relationship with your trading partner while also taking the political situation of the country in which your business partner is based into account.
Documentary credit: maximum certainty
In the case of documentary credit, the importer pays upon production of certain clearly defined documents that have been checked by the bank. As a supplier/exporter, you are certain of being paid once the goods are shipped.
Documentary collection: faster and cheaper settlement
Documentary collection is no guarantee of payment. But it can ensure that the importer/customer cannot take delivery of the goods without having paid or having signed a bill of exchange. The bank acts as an intermediary in this case, passing on certain shipping documents and collecting payment.
Limitations with documentary collections
Since the shipping documents typically accompany the goods themselves in the case of road transport, documentary collections are only suitable for maritime shipments where the ship's bill of lading is sent separately. Please note: the bank only checks the actual content of the bill of lading in the case of documentary credit.
- Prior to delivery:
Once the goods have been sent, and depending from the type of transaction, ING can advance the amount of the documentary credit (against conform documents) or collection (in the form of a discount transaction). The advance is subject to a certain term, e.g. 60 days after dispatch of the goods.
- After delivery:
In the event you allow your foreign customer to defer payment, ING can advance you the amount after deduction of fees and interest (in the form of a discount transaction). In most cases, you do not even need any additional form of credit (example: confirmed documentary credit or documentary collection with bank aval).
ING launched the fully revamped InsideBusiness Trade 2.0 platform in late 2017. This online platform combines the latest in digital technology with new features and convenient functionalities.
Get in touch with your ING international trade contact who will tell you everything you need to know about InsideBusiness Trade 2.0.
Position your business as a dependable trading partner by insuring your payment. ING helps you offer your business partner additional financial security while boosting your liquidity for other projects at the same time.
ING can help you with other services such as the advance checking of documents in the case of documentary credit for exports.