Bank Drafts

Bank drafts, or bills of exchange, is a basic instrument of foreign trade financing that allow exporters to use their banks as collection agents for foreign accounts. The bank forwards the exporterís invoices to the foreign buyer, either by mail or through a branch or correspondent bank in the buyerís country. When the buyer pays the draft, the exporterís bank converses the proceeds of the collection into the exporterís currency and deposits this money in the exporterís account. Two kinds of bank drafts include sight drafts and time drafts.