Under Bills for collection, there is an underlying credit from the supplier for which a Bill of Exchange (an IOU) properly executed by the importer and endorsed by his bank is the underlying “Eligible Instrument”.
Features
Used mostly by parties with long standing relationship or related entities.
Documents are released against accepted bill of exchange (payable at a future date)
Payment is made only after goods are cleared.
Benefits
Suppliers’ finance for up to 270 days (from bill of lading date) allowed by local regulations.
It is straight forward and not as complicated as letters of credit.
Cheaper to use by importers.
Foreign exchange can be procured from the official market.