Documentary Collection is a form of trade finance in which an exporter is paid for its goods by an importer after the two parties' banks exchange the required documents.This type of financing is often used when the two parties have an established relationship and trust each other. It can be a cheaper and less risky alternative to other forms of financing, such as letters of credit.Documentary collections can be used for a variety of goods, including manufactured goods, raw materials, and services. The most common type of document exchanged is a bill of lading, but other documents, such as invoices and insurance policies, may also be involved.The documentary collection process usually begins when the exporter sends the required documents to its bank. The bank then forwards the documents to the importer's bank, along with a request for payment. The importer's bank will release the funds to the exporter once it has received the documents.There are a few risks involved in documentary collections, such as the risk of non-payment or delayed payment. However, these risks can be mitigated by using a reputable bank and ensuring that all documents are in order.
