Time Draft

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Related to Time Drafts: sight draft, acceptance bill, Accepted Draft

Time Draft

A written order to pay a certain sum in money that is payable at a particular future date.

Time drafts, sometimes called time bills or time loans, are frequently used by merchants to finance the transportation of goods.


Commercial Paper.

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To expedite matters, a time draft collection procedure may be used where the draft is sent by the forfaiting bank to the buyer's bank along with the original shipping documents and instructions to release the documents once the draft has been accepted ("documents against acceptance") and, if necessary, avalized.
The difference between the two is that under a time draft, the customer simply signs the draft promising to return to the bank at a specified date in the future and pay for the shipment.
It is important to remember that none of the banks involved in a time draft have any obligation to pay the seller if the buyer defaults.