Advance

Advance payment in foreign trade typically refers to the buyer paying part or all of the goods payment to the seller in advance before receiving the goods or documents, also known as prepayment. It is common in settlement methods such as letters of credit and telegraphic transfer (T/T), especially when the seller requires the buyer to pay a deposit to start production or procurement. Usage scenarios include customized products, first-time cooperation, or when the buyer's credit is insufficient. Precautions: For the buyer, advance payment means tied-up funds and the risk of the counterparty's non-performance, so the proportion should be controlled (e.g., 30% deposit) and paired with a bank guarantee or credit insurance; for the seller, advance payment can improve cash flow, but attention must be paid to the refund liability if delivery cannot be made. It is similar to 'prepayment for goods' but emphasizes the act of advancing funds; it is the opposite of 'open account,' where the seller ships first and collects payment later. The difference is that advance payment is actively paid early by the buyer, whereas payment against documents (D/P) under 'collection' is payment upon presentation of documents, not in advance.