Sales Invoice and Debt Instruments
When goods are sold on open account a claim for payment is made under the commercial contract by raising a sales invoice. The debt represented by the commercial invoice is often the structured financier’s primary source of repayment. The vulnerability of the sales invoice to dispute, delayed payment, reduced payment, and non-payment is highlighted. Where the end-buyer (debtor) is not of acceptable credit quality, the use of credit insurance, letter of credit, or payment guarantee is discussed. When the invoiced debt is purchased by the financier, subject to applicable law, the need and process for debt assignment is explained. Debt obligations in the form of a bill of exchange (draft) and promissory note are described and contrasted with an invoice. Circumstances where debt instruments should be used are explored.