The most commonly-used financial instrument in international trade.
An unconditional order in writing, signed by a buyer, and addressed to another person (drawee), typically a bank, ordering the drawee to pay a stated sum of money to yet another person (payee), often a seller, on demand or at a fixed or determinable future date.
The most common versions of a bill of exchange are:
A Draft; wherein the drawer instructs the drawee to pay a certain amount of money to a named person, usually in payment for the transfer of goods or services.
Sight drafts; are payable when presented.
Time Drafts; (also called usance drafts) are payable at a fixed future (specific) date or determinable (30, 60, or 90 days etc.) date. Time drafts are used as a financing tool (as with documents against acceptance, D/A terms) to give the buyer time to pay for the purchase.
Also known as a draft.