Gloseg
Trade Finance Essentials

International Payments Guide

Protect your business with the right payment methods. From Letters of Credit to escrow, understand how to get paid securely in international trade.

5 Methods
Payment Options
Risk Levels
Compared
Fraud Protection
Tips
Payment MethodsCurrency Risk

Payment Method Risk Spectrum

Seller Risk: LOWSeller Risk: HIGH
Advance Payment
Safest for seller
Escrow
Protected
Letter of Credit
Bank guaranteed
D/P Collection
Bank handled
Open Account
Trust-based

Payment Methods Explained

Letter of Credit (LC)

Risk: Low

Bank guarantees payment when documents meeting specified conditions are presented. Most secure for both parties.

How It Works:

1
Buyer applies for LC at their bank
2
Issuing bank sends LC to advising bank (seller's country)
3
Seller ships goods and prepares documents
4
Documents submitted to advising bank
5
Bank verifies documents and releases payment

Advantages:

  • Bank guarantee eliminates default risk
  • Protects both buyer and seller
  • Standard international practice

Considerations:

  • Expensive (1-3% of value)
  • Complex documentation
  • Strict compliance required
Best for: New trading relationships, large orders, high-risk destinations
Cost: 1-3% of LC value

Documentary Collection (D/P, D/A)

Risk: Medium

Bank handles document exchange. D/P (Documents against Payment) or D/A (Documents against Acceptance).

How It Works:

1
Seller ships goods and submits documents to their bank
2
Documents sent to buyer's bank
3
D/P: Buyer pays to receive documents
4
D/A: Buyer accepts draft (promises to pay later)
5
Documents released, buyer clears goods

Advantages:

  • Cheaper than LC
  • Bank involvement adds security
  • Faster than LC

Considerations:

  • No payment guarantee
  • Buyer could refuse goods
  • Risk if buyer defaults on D/A
Best for: Established relationships, moderate trust level
Cost: 0.1-0.5% of value

Advance Payment (T/T Advance)

Risk: Lowest for Seller

Buyer pays before shipment, typically via bank transfer (T/T). Full or partial advance.

How It Works:

1
Seller sends pro forma invoice
2
Buyer transfers payment
3
Seller confirms receipt
4
Seller ships goods
5
Balance paid (if partial advance)

Advantages:

  • Zero risk for seller
  • Immediate cash flow
  • Simple process

Considerations:

  • High risk for buyer
  • May lose competitive deals
  • Buyers often resist
Best for: Custom/made-to-order products, new buyers, small orders
Cost: Bank transfer fees only

Open Account

Risk: High for Seller

Buyer pays after receiving goods, typically Net 30/60/90 days. Based on trust.

How It Works:

1
Seller ships goods
2
Buyer receives and inspects
3
Invoice sent with payment terms
4
Buyer pays within agreed period

Advantages:

  • Attractive to buyers
  • Competitive advantage
  • Builds relationships

Considerations:

  • High seller risk
  • Cash flow delay
  • Collection challenges if disputes
Best for: Long-term trusted relationships, low-risk countries
Cost: Minimal direct costs

Escrow (Gloseg Trade Assurance)

Risk: Low

Payment held by neutral third party until conditions are met. Gloseg provides escrow for all transactions.

How It Works:

1
Buyer places order and pays to Gloseg escrow
2
Seller ships goods with tracking
3
Buyer confirms receipt and quality
4
Gloseg releases payment to seller
5
Disputes handled by Gloseg mediation

Advantages:

  • Protection for both parties
  • Dispute resolution included
  • Builds trust

Considerations:

  • Platform fees
  • Requires platform usage
  • Release may take time
Best for: Online marketplace transactions, new relationships
Cost: 2-5% platform fee

Managing Currency Risk

Exchange rate fluctuations can significantly impact your profit margins. Here are strategies to protect yourself:

Natural Hedging

Easy

Match currency of costs with currency of revenues

Example: If you sell in USD, try to source materials priced in USD

Forward Contracts

Medium

Lock in exchange rate for future transaction with your bank

Example: Agree today to exchange $100,000 at 5.50 GHS/USD in 90 days

Currency Clause

Easy

Include clause in contract adjusting price if exchange rate changes beyond threshold

Example: Price adjusts if USD/GHS moves more than 5% from signing date

Price in Stable Currency

Easy

Quote and receive payment in USD, EUR, or GBP

Example: Always quote FOB Lagos in USD regardless of buyer location

Payment Red Flags & Fraud Prevention

Request to pay to different account than contract
Verify with known contact, likely scam
Pressure to ship before payment clears
Wait for confirmed funds, no exceptions
Unusually large first order with easy payment terms
Request advance payment or LC
Buyer in high-risk country asking for open account
Require secure payment method
Request to use unfamiliar payment platform
Stick to established methods, verify platform
Overpayment with request to refund difference
Classic scam, refuse transaction
Request to change banking details mid-transaction
Verify via known phone number, not email
Buyer unwilling to provide company verification
Request business license, references

Verifying Buyer Creditworthiness

Request business registration/license
Check company website and social media presence
Ask for trade references from other suppliers
Verify bank details match company name
Use credit reporting services (Dun & Bradstreet, etc.)
Start with small trial order
Request secure payment for first transaction
Video call to verify contact person

Gloseg Trade Assurance

All transactions on Gloseg are protected by our escrow system. Buyer funds are held securely until delivery is confirmed, protecting both parties and enabling trust in new business relationships.

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