GlossaryEN1 min readUpdated: Jun 23, 2026
Advance
An advance is a payment made by a principal before the agreed service has been performed or invoiced.
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Source: https://www.businessdictionary.com/definition/advance.html
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Incoterms 2020 Simulator: Who bears costs & risk?
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Definition & Explanation
An advance is a payment made by a principal before the agreed service has been performed or invoiced. In logistics practice, advances arise when capacity must be locked in, customs duties pre-financed, or storage slots secured – typically on high-risk trade lanes or with operators that do not extend open credit terms. Payment may be made in full or in tranches and is offset against the final invoice; if the service is not delivered, the amount must be refunded. In the freight context, an advance often covers specific third-party disbursements such as port charges, duty payments, or freight contributions, which distinguishes it from a contractual deposit structured as partial performance and security. For the principal, the advance carries a default risk that can be mitigated through bank guarantees or the selection of reputable service providers.
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