GlossaryEN1 min readUpdated: Jun 23, 2026
Advance Payment
Exporters demand advance payment when dealing with unknown buyers or when credit risk in the destination market cannot be adequately assessed.
Quick Answer
Last updated: Published:
Source: https://www.investopedia.com/terms/a/advance-payment.asp
Category
Incoterms 2020 Simulator: Who bears costs & risk?
Reading time
1 min
Words
123
Mentioned in
–
Definition & Explanation
Exporters demand advance payment when dealing with unknown buyers or when credit risk in the destination market cannot be adequately assessed. The buyer transfers the full or partial invoice amount before goods are dispatched or services rendered—making it the most secure payment term for the seller, with virtually no risk of non-payment. For the buyer, the exposure is maximum: funds leave the account before any goods are received, and the entire performance risk rests with the seller. In trade negotiations, advance payment is commonly exchanged for a price concession or a faster delivery commitment. It differs fundamentally from a letter of credit (L/C), which introduces a bank guarantee protecting both parties and represents a middle ground between full prepayment and open account trading.
Next steps
Matching tools and partners
Related Terms
You might also be interested in these terms
⚖️ ICC Incoterms 2020
Incoterms 2020 Simulator: Who bears costs & risk?
Analyze all 11 Incoterms 2020: cost matrix, risk timeline, insurance gap detector and customs responsibility – free, no login required.
Logistics knowledge straight to your inbox
Free · No password · Never a paywall. Weekly top news and facts from logistics.
Community Questions & Answers
Share your knowledge, ask follow-up questions, or add practical insights to this page. Every contribution is moderated before publication.
No community answers yet. Be the first.