Trade Finance Terms & Definitions

Funding provided against outstanding invoices, allowing businesses to access cash before customers pay.

A bank guarantee that protects a buyer's advance payment if the seller fails to deliver goods or services.

A loan secured by a company's assets, including inventory, receivables, equipment and property.

A letter of credit that requires payment to be made immediately upon presentation of compliant documents.

Two letters of credit used in intermediary trade where the intermediary receives an LC from the buyer and issues a separate LC to the supplier.

A bank's commitment to pay a specified amount if the guaranteed party fails to perform its contractual obligations.

A guarantee that a bidder will enter into a contract if awarded and will provide required performance bonds.

A document issued by a carrier acknowledging receipt of goods for shipment and serving as evidence of the contract of carriage.

The maximum amount a lender will advance against eligible collateral, typically calculated as a percentage of inventory and receivables.

Short-term funding used to bridge a timing gap between transactions, such as an acquisition closing before permanent financing is arranged.

A short-term loan used to finance the acquisition or refinancing of commercial real estate until permanent financing is obtained.

Financing for the purchase, storage, transport and sale of physical commodities including oil, gas, metals and agricultural products.

A letter of credit that includes a confirmation from a second bank, typically in the seller's country, adding an additional layer of payment security.

A mechanism that improves the credit profile of a borrower, often through guarantees, letters of credit or other forms of credit support.

A bank's commitment to pay a seller upon presentation of specified documents confirming that goods have been shipped according to the terms of the LC.

Financing provided to exporters to fund the production, processing and shipment of goods for international sale.

A government-backed agency that provides financing, insurance and guarantees to support exports of goods and services.

The sale of a company's accounts receivable to a third party at a discount in exchange for immediate cash.

An Incoterm where the seller is responsible for delivering goods onto the vessel, after which risk transfers to the buyer.

Financing for the production, refining and export of gold dore bars from mining operations to refineries.

A debt instrument issued to raise capital specifically for environmentally sustainable projects.

Financing provided to importers to fund the purchase and shipment of goods from international suppliers.

International commercial terms that define the responsibilities, risks and costs of buyers and sellers in international trade transactions.

A loan secured by inventory, using the physical goods as collateral for working capital.

A short-term borrowing facility secured against unpaid invoices, where the business retains control of the sales ledger.

A letter of credit that cannot be amended or canceled without the consent of all parties involved.

A bank's written commitment to pay a seller on behalf of a buyer, provided that specified conditions are met.

The acquisition of a company using a significant amount of borrowed money, with the target company's assets serving as collateral.

Subordinated debt that sits between senior debt and equity in the capital stack, often with equity-like features such as warrants.

The SWIFT message format used to issue a documentary letter of credit, containing all terms and conditions of the LC.

The SWIFT message format used to issue a standby letter of credit or bank guarantee.

A SWIFT message used for free-format communication between banks, often used to confirm funds availability or provide proof of funds.

A contract between a producer and a buyer for the purchase and sale of future production, often used to secure project financing.

A guarantee that a contractor will perform its obligations under a contract, with the surety paying damages if the contractor defaults.

Financing provided to commodity producers and exporters before shipment, secured against offtake contracts and future production.

Financing provided before goods are shipped, used to cover procurement, processing and production costs.

Long-term financing for infrastructure and industrial projects, where repayment is based on the project's cash flow.

Funding provided against confirmed purchase orders to pay suppliers for goods before they are delivered.

Financing provided against a company's outstanding invoices, converting unpaid receivables into working capital.

A credit facility that allows a borrower to draw, repay and redraw funds as needed for trade transactions.

A U.S. Small Business Administration loan program that provides government-guaranteed financing for business acquisitions and working capital.

A bank guarantee used as a fallback if the buyer fails to perform on a contract, similar to a bank guarantee.

Financing solutions that optimize working capital across the supply chain, including payables finance, receivables finance and inventory finance.

A three-party agreement where the surety guarantees that the principal will perform its obligations, with the obligee as the beneficiary.

The financing of international trade transactions, bridging the gap between when goods are shipped and when payment is received.

A letter of credit that can be transferred by the original beneficiary to one or more suppliers, commonly used in intermediary trade.

The Uniform Customs and Practice for Documentary Credits, the international standard rules for letters of credit issued by the ICC.

A single-layer debt facility combining senior and mezzanine debt into one loan, often used in acquisition financing.

Usance Payable at Sight; a letter of credit that provides deferred payment terms to the buyer while the seller receives payment at sight.

A letter of credit with deferred payment terms, allowing the buyer to pay at a specified future date after shipment.

A loan secured by goods stored in a warehouse, using the warehouse receipt as evidence of title and collateral.

Short-term financing used to fund day-to-day operations, including inventory purchases, payroll and other operating expenses.