PO Financing If You Import Goods, You Need to Understand The Cash Against Documents Process

If You Import Goods, You Need to Understand The Cash Against Documents Process

If your company imports finished products, raw materials, or components into the U.S., you need to know about the Cash Against Documents (CAD) payment method.

The Cash Against Documents Process

CAD is a process in which an importing firm must pay for goods it purchases in full before it takes ownership of those goods. The transaction typically involves a third party that retains possession of the shipping papers. The third-party will hold the items until the payment from the buyer is received.

In recent years, Cash Against Documents transactions has been particularly significant. Especially in importing goods from China, a vital trading partner of U.S. companies.

CAD financing is available for businesses of all sizes – small and medium-sized companies, commercial companies, and corporations.

Cash Against Documents Process

Understanding CAD

Under CAD, the pricing of imported items will be different depending on the shipping terms of the sale. For example, an item may cost $10 per item FOB China, or $25 FOB Miami, FL. In the case of FOB China, the importer transfers the funds before the shipment. Meaning, you cannot inspect them for quality and quantity. If it is FOB Miami, the importer can physically inspect the goods before making the funds transfer to pay for the items. Of course, the lower price for FOB China comes with a potentially higher risk for any damages in your goods. Aside from that, this may not be precise to specifications.

As an importing company, you or a logistics consultant that you hire will need to weigh the risks of your shipping options against the benefits.

Part of the Cash Against Documents process, the exporting firm, e.g., in China or another country, retains ownership of the goods you are importing. That is until payment is made in full to the exporter. Once the payment is made through your financing firm, all documents related to the transaction are released to your firm.

Paragon Financial has a two-decade history of working with small and mid-sized firms. As such, we can provide you with the highest-quality CAD financing for importing the goods you need to conduct your business. With a superior level of international trade finance experience, we can provide the financing for your transaction. Aside from that, we will also make sure that documentation is correctly and accurately filled.