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What Is a Bank Release?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 08 September 2014
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A bank release is a type of financial or bank document that is issued to a customer once payment for the goods identified in the release has been received and processed. Typically, the release authorizes the customer to take possession of the goods identified in the bill of exchange that is associated with the transaction. Once payment has been tendered according to the terms agreed upon by the buyer and seller, the bank release letter is used to move forward with scheduling and executing the delivery of goods named in the document, in accordance with any delivery dates or modes agreed upon between the two parties.

The purpose of the bank release is to acknowledge the receipt of payment and that the buyer has complied with the terms set forth by the seller as part of the transaction. By accepting the payment and having it clear the bank, it is then possible to turn control of the purchased goods over to the new owner. Depending on the terms of the sale, the goods are released by the seller, possibly to a shipper who then has the task of delivering the goods to the buyer.

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The use of a bank release is common in a number of business transactions, especially those that involve the export or import of goods. Sellers will normally not release goods for shipment until there is some sort of guarantee that payment is tendered. The bank release affirms that the payment has been received and is valid, effectively ensuring that the seller does not have to worry about failed payments. In the event that the seller has made some preparation in anticipation of receiving the bank release, the goods may already be prepared for shipment, perhaps in a warehouse near the shipping point. Once the payment is received and documented, the seller releases the goods to the shipper who then transports them to the destination designated by the buyer.

A bank release serves as one more document that tracks the forward movement of a business transaction. Providing assurance that the buyer has provided funds for payment in a timely and proper manner, the release helps to minimize the risk that the seller assumes by participating in the transaction. Considered a useful tool when it comes to international trading of goods, the bank release is also in relatively common use for domestic transactions in many nations around the world.

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