Cash in advance (CAI)

Payment term in which the exporter receives payment before shipment of the goods. This minimizes the exporter´s risk and financial costs, since there is no collection risk and no interest cost or receivables. However, importers rarely agree to these terms, since it ties up their capital and the goods may not be received. Consequently, such terms are not widely used. They are most likely either when the exporter lacks confidence in the importer´s ability to pay (often the case in initial export transactions) or where economic and political instability in the importing country may result in difficulties to obtain payment. See payment terms.

Related entries