Sight draft definition
/What is a Sight Draft?
A sight draft is a bill of exchange that is due and payable on demand. There is no delay in payment. It is commonly used in international trade transactions.
A sight draft is used when an exporter wants to retain title to shipped goods until paid, usually because the importer is considered to be a credit risk. In effect, a sight draft is used to protect the interests of the exporter. Conversely, importers try to avoid it, since a sight draft negatively impacts their cash flow.
To be paid, a sight draft must be presented along with a letter of credit and a bill of lading.
Terms Similar to Sight Draft
A variation on the concept is the time draft, where payment is due at a later date.