ADVANCE PAYMENT

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Advance payment is a form of payment in which the buyer pays the agreed amount in full before the goods are dispatched. This modality represents the highest level of security for the seller, but it is also the riskiest form of payment for the buyer.

In advance payment, the importer must make payment in advance, either by bank transfer, cash deposit, cheque, credit card, among other means of payment. Once payment has been confirmed, the seller proceeds to ship the agreed goods.

However, this form of payment can present certain risks for the buyer, as he is completely at the mercy of the seller. The seller may delay shipment of the goods or even not ship them at all, leaving the buyer without his money and without the goods. For this reason, This form of payment is exceptional and is mainly used when the seller is the sole supplier of the product or when the buyer has full confidence in the seller.

It is important to note that in advance payment, the buyer has no guarantee that he will receive the goods in the agreed condition or that the seller will fulfil his obligations. This is why, if this modality is to be used, it is essential that the buyer carries out a thorough investigation of the seller and ensures that the seller has a good reputation and credibility in the market.

In conclusion

Prepayment is a form of payment in which the buyer pays in full before the goods are shipped. Although it is the safest way for the seller, it represents a high risk for the buyer, so it is recommended to use this method only in exceptional situations and after careful investigation by the seller.

Prepayment may be of interest in certain situations, for example:

1. When the seller is the sole supplier of the product and the buyer needs to ensure the availability of the product in the future.
2. When confidence in the seller is high and there is a long-standing business relationship between the parties.
3. When the risk of non-payment is very high and the buyer wishes to ensure the delivery of the goods.
4. When the buyer wishes to obtain a cash discount.

In any case, prepayment is an option that should be considered with caution, as it implies a high level of risk for the buyer. Therefore, before deciding on this payment method, it is important to make a thorough assessment of the seller and the commercial conditions to ensure that you are making an informed and appropriate decision.

How is the advance payment made?

Advance payment is a form of payment in which the importer makes full payment for the sale and purchase before the goods are shipped. Therefore, prepayment is made directly to the seller or to the seller's bank prior to shipment.

In order to make the advance payment, the importer must be sure that the seller is reliable and will comply with the terms of the sale and purchase. Once the importer is sure, payment can be made by bank transfer, bank cheque, money order, credit card, among others.

It is important to note that this form of payment is the most risky for the buyer, as if the seller does not comply with the terms of the sale and purchase, the importer does not have many options to recover his money. Therefore, it is recommended to use this form of payment only in situations where the importer has full confidence in the seller and there is no other option available.

An advance payment ensures that you are paid before the goods are shipped and is therefore the safest way for the seller and the riskiest for the buyer. In advance payment, the importer, prior to shipment, places the amount of the sale at the exporter's place of business. 

This form of payment represents many risks for the buyer; who is entirely at the mercy of the seller's good faith, who may eventually and even deliberately delay the shipment of goods unduly or in the worst case not at all. The use of this modality is exceptionalfor example, when the seller dominates the market by being the sole supplier of the product.