Discusses the most common methods of payment, such as open account, letter of credit, cash in advance, documentary collections, factoring, etc. Includes credit-rating and collection agencies in this country. Includes primary credit or charge cards used in this country.
Last Published: 7/24/2018

Australia has a wide range of export financing options available. A few basic tools are described below. US companies should choose the option that is favorable to both transacting parties. We recommend consulting the international services division of a US or Australian financial institution for a more complete description and recommendations regarding the best option for a given transaction.
 

Cash in Advance

The exporter demands cash in advance before exporting. From the buyer’s perspective, this is the least popular method. A US exporter requiring cash in advance lowers his risk but potentially reduces his competitive position. Modified forms of this method (e.g. deposit with progress payments) are normally used for custom-built equipment or other unique products.
 

Letters of Credit

These documents substitute credit issued from the buyer’s bank. In the case of Confirmed Irrevocable Letters of Credit, the confirming bank is guaranteeing payment by the issuing bank. A Letter of Credit (L/C), however, includes terms and conditions that the exporter must perform to receive payment. This is a very secure form of payment and is frequently used for new or unknown clients, where there is a higher risk of nonpayment. Offering more flexibility, and not as onerous as Cash in Advance, Letters of Credit still represent an obligation on the Australian importer’s credit line, and will incur bank fees.
 

Commercial Bills of Exchange

These bills of exchange (sight and time drafts and cash against documents) are processed through the banks of both parties involved in the transaction. Like an L/C, banks do not guarantee payment or release shipping documents until both parties meet the terms of the exchange.
 

This method carries higher risk than Letters of Credit as the importer may refuse to pay. The exporter should obtain credit references or have long-standing relationships with the importer before offering this form of financing. Importers prefer this method because it does not affect their cash flow or tie up commercial credit lines. These advantages to the importer have made it one of the most widely-used forms of trade financing.
 

The majority of Australian imports from the US allow payment terms from 30-180 days from the date of the shipping documents. This method carries the greatest risk to the exporter but is the most attractive to the importer.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.