Cash in Advance is the most secure payment term for the exporter (seller) and the riskiest for the importer (buyer). In this scenario, the buyer sends the full payment (usually via wire transfer) before the heavy equipment is even shipped, sometimes before it is built.
Heavy Equipment Standard
In the used machinery market, Cash in Advance is the industry standard. Because every used machine is unique (condition, hours, wear), sellers rarely offer credit terms. If you are selling a 2018 Caterpillar D6 Dozer, you typically demand 100% funds in the bank before you release the machine to the buyer’s trucker.
This protects you from the nightmare of shipping a 20-ton machine to Nigeria only to have the buyer default, leaving you stranded with storage fees at a foreign port.
Structuring the Deal
To make this palatable to buyers who are afraid of scams, the transaction is often split:
- Deposit: A 10% to 30% non-refundable deposit to hold the machine and take it off the market.
- Inspection period: The buyer flies in (or hires a mechanic) to inspect the iron.
- Balance payment: The remaining balance is wired.
- Release: Once the wire hits the seller’s account, the “Gate Pass” is issued for pickup.
Wire Fraud and Change of Bank Scams
Because Cash in Advance involves large wire transfers ($50k – $500k+), it is a prime target for Business Email Compromise (BEC). Fraudsters will hack email accounts and send a message right before payment is due, saying, “Our bank account has changed, please wire funds here.” Never accept bank changes via email. Always verbally verify wire instructions with a known contact at the dealer before sending Cash in Advance.
