Sight draft definition

What is a Sight Draft?

A sight draft is a bill of exchange that is due and payable on demand. There is no delay in payment. It is commonly used in international trade transactions.

A sight draft is used when an exporter wants to retain title to shipped goods until paid, usually because the importer is considered to be a credit risk. In effect, a sight draft is used to protect the interests of the exporter. Conversely, importers try to avoid it, since a sight draft negatively impacts their cash flow.

To be paid, a sight draft must be presented along with a letter of credit and a bill of lading.

Terms Similar to Sight Draft

A variation on the concept is the time draft, where payment is due at a later date.

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