Characteristics of an Open Account

Applicability

Recommended for use (a) in low-risk trading relationships or markets and (b) in competitive markets to win customers with the use of one or more appropriate trade finance techniques.

Risk

Significant risk to exporter because the buyer could default on payment obligation after shipment of the goods.

Pros

• Boosts competitiveness in the global market

• Helps establish and maintain a successful trade relationship

Cons

• Significant exposure to the risk of non-payment

• Additional costs associated with risk mitigation measures

Source : http://trade.gov/media/publications/abstract/trade_finance_guide2008desc.html

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