Definition of Time draft:
A time draft is a form of payment that is guaranteed by an issuing bank but is not payable in full until a specified amount of time after it is received and accepted. Many international trade transactions use drafts as a way to indicate the terms of payment for shipped goods. A time draft allows the importer (or buyer) time to pay for the goods received from the exporter (or seller). Time drafts are a type of short-term credit used for financing transactions of goods in international trade.
Bill of exchange payable at a fixed future date or a determinable future time such as 30 days after presentation (after sight). The purpose of a time draft is to allow the buyer some time to pay for goods bought. In contrast, a sight draft becomes payable at the time it is presented to the buyer. Also called usance draft.
The purpose of time drafts is to facilitate international trade. When an exporter receives an order from an unknown importer (or with which it has little credit history) in another country, the importer can apply for a banker's acceptance with their bank, which substitutes the bank's credit for the importer's credit. The banker's acceptance is a negotiable instrument or document that allows the bank to guarantee payment to the exporter for the shipped goods.
How to use Time draft in a sentence?
- Time drafts are a type of short-term credit used for financing transactions of goods in international trade.
- A time draft is a type of payment document whereby a buyer accepts shipped goods and agrees to pay the seller at a specified future date.
- A time draft allows the importer (or buyer) time to pay for the goods received from the exporter (or seller).
- A time draft is also a guaranteed payment to the seller by an issuing bank.
Meaning of Time draft & Time draft Definition