A bill of exchange turns a trade debt into a signed, transferable claim, which courts treat as close to cash
A bill of exchange is an unconditional written order to pay, and a promissory note is an unconditional written promise to pay. Both can change hands and be discounted, and the English High Court has said bills are generally treated as cash.
Standby letters of credit and demand guarantees do the same job, differing mainly in rules and vocabulary
A standby letter of credit and a demand guarantee both pay the beneficiary on a complying demand after a default. Standbys usually follow ISP98 and demand guarantees URDG 758; the main differences are terminology and practice.
A documentary collection lets banks hold the documents until the buyer pays or accepts, with no bank promising to pay
In a documentary collection the seller's bank sends documents to the buyer's bank, which releases them against payment (D/P) or acceptance of a draft (D/A). No bank promises to pay.
Open account ships the goods before the invoice is due, so the seller finances the buyer for 30 to 90 days
In an open account sale the goods ship before payment is due, typically in 30, 60 or 90 days. The seller carries the buyer's payment risk and can manage it with export credit insurance, a standby letter of credit or receivables finance.
A letter of credit puts a bank's promise behind the buyer's, and the bank pays only against complying documents
A letter of credit is a bank's commitment, on behalf of the importer, to pay the exporter if the credit's terms are met. The bank pays only when the exporter's documents comply.
Four payment terms decide who waits for cash, and each step toward open account moves the risk to the seller
Under cash in advance the buyer pays before shipment. Under a letter of credit a bank commits to pay; under a documentary collection banks handle the documents but take no risk; under open account the seller ships first and is paid, typically, in 30, 60 or 90 days.