The Important Things to Know about Deferred Payment

Deferred payments are a sort of payment that is partially or completely postponed for financial causes. A deferred payment may come in many forms. Some type of deferred payments keeps individuals at a business, while other deferred payments enable students suffering financial hardships to pursue their education. Moreover, in real estate businesses deferred payments help keep neighbourhoods intact.

Short description of deferred payment:

Deferred Payment is a type of Letter of Credit where a conditional undertaking is taken by the bank to pay the seller. Here the bank guarantees on behalf of the buyer on a particular prospective date after completion of the deal. The bank completes the payment on the presentment of all essential documents. The date and time of payment are generally decided after the shipment of goods or produce.

Significance of Deferred Payment:

Deferred Payment is approved when the seller and buyer are living in different countries. In this situation, the buyer needs assurance from the seller that his/her products would be dispatched on time. Also, the seller wants a promise from the buyer that he/she will be paid timely for the products shipped by him/her. Deferred LC gives solutions for all such problems. In the first step, the buyer’s bank shows the Letter of Credit in favour of the seller’s name. And then, the bank sends the Letter of Credit to the seller’s bank to negotiate. And at last, this negotiating bank will give its confirmation and guarantee to the LC upon the request of that particular seller.

As it is a deferred payment, the payment may be postponed for a period ranging from 30 to 180 days. The exporter holding the draft must accept payment from the bank after the predetermined period of the deferred payment is over.

Benefits of deferred payment:

Let’s explore the benefits

• It enables the buyer to import goods at quite lower financial cost
• It assures the seller for the payment of produce
• It promotes international businesses among the countries.

Go to a reputed non-banking company

If you are looking for any type of consultancy service to facilitate your trade and business, you may get in touch with Merchant Credit and Guarantee Corporation Limited (MCG). It is a non-financial company offering consultancy and broking services for over 20 years. Their services include a letter of credit, bank guarantee, Standby letter of credit, deferred payment, and so on. Click on merchantcreditcorp.co to get further details about their services.