Cash against documents

Cash against documents (CAD) is a payment term where the bank or agent releases the shipping documents, principally the original bill of lading that controls title to the cargo, only when the buyer pays. It is a documentary collection, not a documentary credit: the bank acts as a conduit and gives no payment guarantee, so the seller carries the buyer’s credit risk until funds clear. The seller ships, then routes the bill of lading set through the banking channel with a collection instruction. The buyer cannot take delivery without the original bill, which gives the seller security short of a letter of credit.