GlossaryEN1 min readUpdated: Jun 16, 2026

Advance Payment

Exporters require advance payment when dealing with unknown buyers or when credit risk in the destination market cannot be adequately assessed.

Last updated: 16 June 2026Published: 19 June 2025

Source: https://www.investopedia.com/terms/a/advance-payment.asp

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Incoterms 2020 Simulator: Who bears costs & risk?

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Exporters require 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 them. In trade negotiations, advance payment is commonly traded against a price concession or a faster delivery commitment. It differs fundamentally from a letter of credit (L/C), which introduces a bank guarantee that protects both parties.

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Advance Payment

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Related Terms

Payment clause; payment plan

payment clause

payment term

Connected Freight Payment Systems

payment deadline

additional customs value payment

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