Glossary of Industry Terms
The Berne Union has compiled a glossary of terms relating to trade / export finance and export credit and political risk insurance. The definitions are collected from a variety of original sources (which are all linked for reference). Where multiple sources exist for a given defiendum, all sources are included. Where there is no suitable source we have provided an original definition.
| Terminology | Definition | Source | |
| abandonment | Abandonment is the act of surrendering a claim to, or interest in, a particular asset. In securities markets, abandonment is the permitted withdrawal from a forward contract that is made for the purchase of deliverable securities. For instance, in some cases an options contract may not be worthwhile or profitable to exercise, so the purchaser of the option lets it expire without being exercised. | Investopedia | |
| accelerated payment |
Accelerated payment occurs when a borrower speeds up the repayment of a loan. This can be generally done by: i) Shortening the amortization period, which increases the amount of each regular payment ii) Making payments more frequently—for example, weekly or bi-weekly instead of once a month iii) Making extra lump-sum payments at scheduled intervals |
BCD | |
| acceleration clause | An acceleration clause is a contract provision that allows Lenders to "accelerate" the due date of the Borrower's outstanding loans. In other words, this clause outlines the reasons that Lenders can demand the Borrower to immediately repay all of the outstanding loans. | Investopedia | |
| acceptance (of a bill) | An acceptance is a contractual agreement by an importer to pay the amount due for receiving goods at a specified date in the future. Documents are presented for acceptance in international trade. The buyer of the goods or importer agrees to pay the draft and writes "accepted," or similar wording indicating acceptance. The buyer becomes the acceptor and is obligated to make the payment by the maturity date. | Investopedia | |
| acceptance credit | A Letter of Credit which includes a Draft in its required documentation. The Draft will be accepted by the bank on which it is drawn and may be discounted and the proceeds paid to the beneficiary. | ITFA | |
| acceptor, drawee | The acceptor is the third party who accepts responsibility for payment in a bill of exchange. The bill of exchange will generally have three parties: the drawor, the drawee and the acceptor. | Investopedia | |
| accommodation bill | Bill of exchange endorsed by a reputable third party (called an accommodation party or accommodation endorser) acting as a guarantor, as a favor and without compensation. The bill then can be discounted on the financial strength of the guarantor who remains liable until the bill is paid. | businessdictionary | |
| act of God, force majeure | The manifestation of a natural force that is beyond the control of the insured, buyer, guarantor or government. | ICISA | |
| An unforeseeable situation beyond the insured’s control preventing fulfilment of the obligations under the export contract. | ATRADIUS | ||
| Force majeure includes events such as whirlwinds, flooding, earthquakes, volcanic eruptions, flood tides, or nuclear accidents. | SERV | ||
| act of state, government intervention | A law, decision or action by a sovereign state that cannot be questioned or redressed by the courts of another state. An Act of State may prevent or frustrate the performance or completion of a credit-insured trade contract or transaction. | ICISA | |
| actual exposure | The amount of CREDIT RISK exposure in a DERIVATIVE or financial transaction, typically reflected as a MARKTOMARKET valuation. If DEFAULT occurs when actual exposure is positive to the nondefaulting party, a credit loss arises; if negative, no credit loss occurs. Actual exposure is one of two components, along with FRACTIONAL EXPOSURE, in the determination of total credit exposure. Also known as ACTUAL MARKET RISK, REPLACEMENTCOST. | thelawdictionary | |
| administrative fee, administration charge, management fee | A charge levied as a contribution towards an ECA’s administration costs. | Berne Union | |
| administration expenses | Costs incurred in conducting an insurance operation other than loss adjustment expenses, acquisition costs, and investment expenses. | Guy Carpenter | |
| admission/acknowledgement of debt | An acknowledgement of debt is a unilateral deal whereby a debtor voluntarily and expressly acknowledges his liability to the creditor for a particular sum of money, committing to pay it on a specified date. These is the means by which the debtor commits himself to the payment of the acknowledged debt. | Fortunylegal | |
| advance (payment) |
An advance payment is a type of payment made ahead of its normal schedule such as paying for a good or service before you actually receive it. Advance payments are sometimes required by sellers as protection against nonpayment, or to cover the seller's out-of-pocket costs for supplying the service or product. There are many cases where advance payments are required. Consumers with bad credit may be required to pay companies in advance, and insurance companies generally require an advance payment in order to extend coverage to the insured party. |
Investopedia | |
| advance payment guarantee/bond | An “advance payment guarantee” is the guarantee of a bank or insurer that protects the down payment risk of an importer. If the exporter does not provide the goods or services agreed upon, or goes bankrupt, the importer’s down payment is returned. | OEKB | |
| agent | An agent, in legal terminology, is a person who has been legally empowered to act on behalf of another person or an entity. When it comes to project finance, banks take up various 'Agent' roles such as 'Administrative Agent', 'Collateral Agent', etc and receive a certain fee in return. | Investopedia | |
| aging receivable | Accounts receivable aging(tabulated via an aged receivables report) is a periodic report that categorizes a company's accounts receivable according to the length of time an invoice has been outstanding. It is used as a gauge to determine the financial health of a company's customers. If the accounts receivable aging shows a company's receivables are being collected much slower than normal, this is a warning sign that business may be slowing down or that the company is taking greater credit risk in its sales practices. | Investopedia | |
| allocation (under a line of credit) | 1. Finance: An authorization to incur expense or obligation up to a specified amount, for a specific purpose, and within a specific period. | businessdictionary | |
| All-in Cost Equivalence | The net present value of premium rates, interest rate costs and fees charged for a direct credit as a percentage of the direct credit amount is equal to the net present value of the sum of premium rates, interest rate costs and fees charged under pure cover as a percentage of the credit amount under pure cover. | OECD | |
| all-vetting | All contracts to which the guarantee applies must be approved, i.e. the guarantee holder is allowed no discretion. | Berne Union | |
| annual installment | Amount payable annually on a Distribution Date or Initial Distribution Date based on value of the Account as of the Valuation Date. The amount of each installment shall be calculated by multiplying such Account balance by a fraction the numerator is 1 and denominator is the remaining installments. Each installment shall be a separate payment for purposes of the Treasury Regulations issued pursuant to Section 409A of the Code. SAMPLE 1 SAMPLE 2 BASED ON 2 DOCUMENTS | lawinsider | |
| annuity | Payment at regular intervals and for a specified time of an equal sum comprising interest and principal for a loan. As the level of the annuity remains constant, the interest due for the debt decreases and the per-centage of repayment for the principal amount increases. | Berne Union | |
| application for credit approval | A credit application is a request for an extension of credit. Credit applications can be done either orally or in written form usually through an electronic system. Whether done in person or individually the application must legally contain all pertinent information relating to the cost of the credit for the borrower, including the annual percentage yield (APY) and all associated fees. | Investopedia | |
| arbitration | Arbitration is a mechanism for resolving disputes between investors and brokers, or between brokers. It is overseen by the Financial Industry Regulatory Authority (FINRA), and the decisions are final and binding. Arbitration is distinct from mediation, in which parties negotiate to reach a voluntary settlement, and decisions are not binding unless all parties agree to them. Arbitration is not the same as filing an investor complaint, in which an investor alleges wrongdoing on the part of a broker, but has no specific dispute with that broker, for which the investor seeks damages. | Investopedia | |
| A consensual dispute resolution process where the parties agree to submit their disputes to be resolved by an arbitral tribunal composed by arbitrator(s) who is/are independent third party/parties appointed by or on behalf of the parties in dispute. Arbitration awards will be final and binding. | HKEC | ||
| Process of resolving a dispute or a grievance outside of the court system by presenting it to an impartial third party or panel for a decision that may or may not be binding. | U.S. Commercial Service | ||
| Arbitration, a form of alternative dispute resolution (ADR), is a way to resolve disputes outside the courts. The dispute will be decided by one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), which renders the "arbitration award". | wikipedia | ||
| Arrangement on Guidelines for Officially Supported Export Credits (Consensus) |
The Arrangement on Officially Supported Export Credits is an agreement among the OECD member countries seeking to foster a level playing field in global competition. The agreement contains minimum standards for terms and conditions of payment, credit periods and premium calculations for officially supported export credits with terms of more than two years. The standards are constantly being updated by the OECD Arrangement Group. Members of the OECD Export Credit Group agree to principles or recommendations for combating corruption in international commerce, granting sustainable loans for countries at a high risk of debt distress and ensuring that exports meet certain environmental and human rights standards. The latest version of the guidelines can be found here : https://www.oecd.org/trade/topics/export-credits/arrangement-and-sector-understandings/ |
SERV | |
| arrears, overdues | Alternative term for Overdue account. The term ‘in arrears’ is also used to refer to premium payments to be made at the end of a period (typically on the basis of the policyholder’s declaration of invoiced turnover or outstanding balances for that period), as opposed to premium payments ‘in advance’, i.e. at the start of the relevant period. | ICISA | |
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Arrears is a financial and legal term that refers to the status of payments in relation to their due dates. The word is most commonly used to describe an obligation or liability that has not received payment by its due date. Therefore, the term arrears applies to an overdue payment. If one or more payments have been missed where regular payments are contractually required, such as mortgage or rent payments and utility or telephone bills, the account is in arrears. Payments that are made at the end of a period are also said to be in arrears. In this case, payment is expected to be made after a service is provided or completed—not before. Arrears, or arrearage in certain cases, can be used to describe payments in many different parts of the legal and financial industries including the banking and credit industries, and the investment world. |
Investopedia | ||
| asset-backed finance (ABF) | Asset-based financeis a specialized method of providing companies with working capital and term loans that use accounts receivable, inventory, machinery, equipment and real estate as collateral. It is essentially any loan to a company secured by one of the company's assets. This type of funding is often used to pay for expenses when there are gaps in a company's cash flows, but can also be used for startup company financing, refinancing existing loans, financing growth, mergers and acquisitions, and management buy-outs (MBOs) and buy-ins (MBIs). | Investopedia | |
| assignee | An assignee is a person, company or entity who receives the transfer of property, title or rights from a contract. The assignee receives the transfer from the assignor. For example, an assignee may receive the title to a piece of real estate from an assignor. | Investopedia | |
| assignment | The transfer of rights and/or obligations under a contract from one party to another. With respect to an export credit guarantee this most often applies where an exporter assigns the benefits of insurance it has obtained from a credit insurer to a bank as security for financing. | NZECO | |
| assignment of a debt | Transfer of debt and its rights and obligations to a third party. | HKEC | |
| assignment of a policy | assignment of insurance:Transfer by the holder of a life insurance policy (the assignor) of the benefits or proceeds of the policy to a lender (the assignee), as a collateral for a loan. In the event of the death of the assignor, the assignee is paid first and the balance (if any) is paid to the policy's beneficiary. Other types of insurance policies may not be used for this purpose. | businessdictionary | |
| associated financing | The combination of Official Development Assistance, whether grants or Loans, with any other funding to form finance packages. Associated Financing packages are subject to the same criteria of concessionality, developmental relevance and recipient country eligibility as Tied Aid Credits. | OECD | |
| Associated financing may take various forms including mixed credits, mixed financing, joint financing, parallel financing or single integrated transations. | Berne Union | ||
| assume liability |
An assumed liabilityis a liability that one party takes on under the terms of a contract. In the context of insurance, insurance policies that protect against losses from an assumed liability are available. Assumed liabilities are also known as contractual liabilities. |
insuranceopedia | |
| at sight |
"At sight" is a payment due on demand. An at-sight payment will require the party receiving the good or service to pay a certain sum immediately upon being presented with the bill of exchange. This type of payment is also known as a "sight draft" or a "sight bill." |
Investopedia | |
| auction sale | A sale by auction is a public sale where various intending buyers offer bids for the goods and try to outbid each other. Ultimately, the goods are sold to the highest bidder. An auction sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner. The property in the goods thus passes on the fall of the hammer; until the fall of the hammer the bidder has the right to revoke his/her bid. The auctioneer is, generally not the seller but, the agent of the real owner of the goods. Auctioneer is engaged to conduct the auction and his/her relationship with the seller is governed by the law of agency. | uslegal | |
| auditor | An auditor is a person authorized to review and verify the accuracy of financial records and ensure that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a consultancy basis, helping organizations to spot ways to boost operational efficiency. Auditors work in various capacities within different industries. | Investopedia | |
| award |
1. Acceptance of a bid or proposal for a contract. 2. Written decision of a court or arbitrator. |
businessdictionary | |
| back-to-back (letter of) credit, secondary credit, countervailing credit | Two letters of credit which cover a single shipment of goods, involving a middleman. The first letter of credit is issued on the application of the middleman to pay for his import of goods on the security of the second letter of credit under which he is paid by the ultimate buyer of the goods. | ITFA | |
| A transaction in which the existence of one letter of credit serves as collateral/security to support the issuance of a second, though independent letter of credit (called the counter-credit). | NZECO | ||
| Back-to-back letters of credit consist of two letters of credit (LCs) used together to finance a transaction. A back-to-back letter of credit is usually used in a transaction involving an intermediary between the buyer and seller, such as a broker, or when a seller must purchase the goods it will sell from a supplier as part of the sale to his buyer. | Investopedia | ||
| bad debt | Bad debt is an expense that a business incurs once the repayment of credit previously extended to a customer is estimated to be uncollectible. Bad debt is a contingency that must be accounted for by all businesses who extend credit to customers, as there is always a risk that payment will not be received. | Investopedia | |
| doubtful account | Doubtful debts are those debts which a business or individual is unlikely to be able to collect. The reasons for potential non-payment can include disputes over supply, delivery, the condition of item or the appearance of financial stress within a customer's operations. When such a dispute occurs it is prudent to add this debt or portion thereof to the doubtful debt reserve. This is done to avoid over-stating the assets of the business as trade debtors are reported net of Doubtful debt. When there is no longer any doubt that a debt is uncollectible, the debt becomes bad. An example of a debt becoming uncollectible would be: once final payments have been made from the liquidation of a customer's limited liability company, no further action can be taken. | wikipedia | |
| balance on current account | The current account balance of payments is a record of a country's international transactions with the rest of the world. The current account includes all the transactions (other than those in financial items) that involve economic values and occur between resident and non-resident entities. | OECD | |
| ballooning | A balloon payment is a large payment due at the end of a balloon loan, such as a mortgage, a commercial loan, or another type of amortized loan. A balloon loan is typically for a relatively short term, and only a portion of the loan's principal balance is amortized over that period. The remaining balance is due as a final payment at the end of the term. | Investopedia | |
| bank guarantee | A bank guarantee is a type of guarantee from a lending institution. The bank guarantee means a lending institution ensures that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it. A bank guarantee enables the customer, or debtor, to acquire goods, buy equipment or draw down a loan. | Investopedia | |
| banker’s acceptance | A banker's acceptance (BA) is a short-term debt instrument issued by a company that is guaranteed by a commercial bank. Banker's acceptances are issued as part of a commercial transaction. These instruments are similar to T-bills, are frequently used in money market funds and are traded at a discount from face value on the secondary market, which can be an advantage because the banker's acceptance does not need to be held until it matures. | Investopedia | |
| banker’s commission/fee | Bank fees are nominal fees for a variety of account set-up and maintenance, and minor transactional services for retail and business customers. Fees can be one-time, ongoing or related to penalties. | Investopedia | |
| bankruptcy | Bankruptcy is a legal term for when a person or business cannot repay their outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt. | Investopedia | |
| Legal procedure for liquidating a business which cannot fully pay its debts out of its current assets. Bankruptcy can be brought upon itself by an insolvent debtor or it can be forced on court orders issued on creditors' petition. | HKEC | ||
| bankruptcy proceedings | The bankruptcy procedure is: a) filing a petition (voluntary or involuntary) to declare a debtor person or business bankrupt, or, under Chapter 11 or 13, to allow reorganization or refinancing under a plan to meet the debts of the party unable to meet his/her/its obligations. This petition is supposed to include a schedule of debts, assets and income potential. b) A hearing called "first meeting of creditors" with notice to all known creditors. This is usually brief and the judge assignes the matter to a professional trustee. c) Later the trustee reports and there is a determination of what debts are dischargeable, what assets are exempt, and what payments are possible. d) If there are assets available then the creditors are requested in writing to file a "creditor's claim." e) There may be other hearings, reports, proposals, hearings on claims of fraudulent debts, petitions for removing the stay on foreclosures and other matters. f) The final step is a hearing on discharge of the bankrupt, which wipes out unsecured debts (or a pro rata share of them). | thefreedictionary | |
| Basel Accord | The Basel Accords are three series of banking regulations (Basel I, II, and III) set by the Basel Committee on Bank Supervision (BCBS). The committee provides recommendations on banking regulations, specifically, concerning capital risk, market risk, and operational risk. The accords ensure that financial institutions have enough capital on account to absorb unexpected losses. | Investopedia | |
| basic premium | A fraction of the standard premium. This portion is used for administrative costs and agents' commissions. | businessdictionary | |
| basis points (above LIBOR) | One hundredth of a percentage point (100 basis points = 1 per cent). | ITFA | |
| (basis points)One-hundredth of one percentage point (1bp equals 0.01%). One basis point is the smallest measure used to quote yields on bills, notes, and bonds. | NZECO | ||
| The basing point is the specific predetermined geographical location used in the basing point pricing system, in which the delivered price is the same for every destination, no matter where the product is produced or from what point it is shipped. Firms would set the prices of their goods within a given market based on a base price plus a set rate for transportation charges, regardless of just how far buyers were from their location. | Investopedia | ||
| bid bond | A bond/guarantee required to be issued by a bank or other financial institution on the application of company tendering for a contract to assure the prospective buyer that the company will comply with the terms of the tender should it be accepted. | ITFA | |
| A guarantee (usually a bank) issued on the order of the seller to pay part of the bid price (5%-10%) and thus to compensate the buyer if the seller, after acceptance of the bid by the buyer, is not willing or able to fulfill tender terms and to conduct a corresponding delivery of performance contract. | ATI | ||
| A bid bond is often required in international tenders. Only bidders who deposit a bank guarantee together with their offer will be accepted. The tendering authority wants to ensure that the bidder is able to fulfil its obligations with the offer and not, for example, back out of the contract. The amount is usually between 2% to 5% of the offer value. | OEKB | ||
| A bond or guarantee, normally issued by a bank on behalf of an exporter in favour of a buyer that provides that if an exporter submits a bid or tender and is awarded the contract, but then fails to conform or to comply with the terms of its tender, the bond may be called. A bid bond gives the buyer some financial assurance that bidders will comply with the terms of their bids. In theory, the calling of the bond should compensate the buyer for the costs of the aborted tender and of re-tendering and re-awarding the contract. | NZECO | ||
| A bid bond is a debt secured by a bidder for a construction job, or similar type of bid-based selection process, for the purpose of providing a guarantee to the project owner that the bidder will take on the job if selected. The existence of a bid bond provides the owner with assurance that the bidder has the financial means to accept the job for the price quoted in the bid. | Investopedia | ||
| bid | A bid is an offer made by an investor, trader, or dealer in an effort to buy a security, commodity, or currency. A bid stipulates the price the potential buyer is willing to pay, as well as the quantity he or she will purchase, for that proposed price. A bid also refers to the price at which a market maker is willing to buy a security. But unlike retail buyers, market makers must also display an ask price. | Investopedia | |
| bill of exchange, draft | An unconditional order in writing addressed by the drawer (exporter) to the drawee (importer) requiring the drawee to pay a sum of money to, or to the order of, a specified institution/person (payee) or to the bearer on demand or on a specified or determinable future date. | ITFA | |
| An unconditional written order that binds one party to pay a fixed sum of money to another party on demand or at a predetermined future date. For example, a bill of exchange is drawn up by the exporter and accepted (and signed) by the importer, who then is responsible for paying on presentation of the bill at the appropriate time. When the bill bears no date, it is normally referred to as a sight bill. Where credit is involved, bills are variously referred to as time bills, tenor bills, or usance bills. Once accepted, bills can be sold or discounted. Bills accepted by companies with a high credit rating or that have the aval of a bank are often used in forfaiting. | NZECO | ||
| A bill of exchange is a written order once used primarily in international trade that binds one party to pay a fixed sum of money to another party on demand or at a predetermined date. Bills of exchange are similar to checks and promissory notes—they can be drawn by individuals or banks and are generally transferable by endorsements. | Investopedia | ||
| bill of lading | Contract between the owner of the goods and the carrier. For vessels, there are two types: a straight bill of lading, which is not negotiable, and a negotiable, or shipper’s orders, bill of lading. The latter can be bought, sold, or traded while the goods are in transit. | U.S. Commercial Service | |
| A document issued by shipping companies to the shipper as evidence of a contract of carriage, and pre-payment of freight charges for goods carried by sea and which also constitutes a document of title to those goods. | ITFA | ||
| An important document in international trade that provides evidence of receipt of goods by the shipper, which gives details of the conditions of transport and normally conveys title to the goods. | HKEC | ||
| A very important document in international trade that provides evidence of receipt of goods by the shipper, gives details of the conditions of transport and destination, and, importantly, normally conveys title to the goods. | NZECO | ||
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A bill of lading (BL or BoL) is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. A bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination. This document must accompany the shipped products, no matter the form of transportation, and must be signed by an authorized representative from the carrier, shipper, and receiver. As an example, a logistics company intends to transport, via heavy truck, gasoline from a plant in Texas to a gas station in Arizona. A plant representative and the driver sign the bill of lading after loading the gas on the truck. Once the carrier delivers the fuel to the gas station in Arizona, the truck driver requests that the station clerk also sign the document. |
Investopedia | ||
| blank acceptance | Blank Acceptance is an acceptance by a bill-of-exchange drawee before the bill is made. It is done as indicated by the drawee's signature on the instrument. | uslegal | |
| bond (guarantee) | A financial guarantee, issued by a bank or insurance company, allowing the beneficiary to draw down if the exporter has defaulted, eg if the goods and services are unsatisfactory. Most bank bonds are "on-demand" which means the buyer does not need to justify or provide evidence of his dissatisfaction. See also bid bond, performance bond. | NZECO | |
| A guaranteed bond is a debt security that offers a secondary guarantee that interest and principal payments will be made by a third party, should the issuer default due to reasons such as insolvency or bankruptcy. A guaranteed bond can be municipal or corporate, and backed by a bond insurance company, a fund or group entity, a government authority, or the corporate parents of subsidiaries or joint ventures that are issuing bonds. | Investopedia | ||
| bond (investment) | An interest-bearing certificate of public or private indebtedness. | Berne Union | |
| bonded goods |
Bonded Goods are imported shipments on which customs charges, including duties, taxes, and any penalties are still owing. Bonded goods are kept in an area of a warehouse controlled by customs authorities, called a customs bonded warehouse. When the bonded warehouse is managed by a third party, as in the US, importers are required to pay a customs bond in advance of import. Bonded goods are released only when the customs authorities have received payment in full. After a defined period, if the payment has not been made, US Customs destroys or otherwise disposes of the products in the shipment. |
freightos | |
| borrower / buyer | includes (but is not limited to)commercial entities as well as sovereign entities | OECD | |
| An individual, organization or company that is using funds, materials or services on credit. | businessdictionary | ||
| breach of contract | A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract. This breach could be anything from a late payment to a more serious violation such as failure to deliver a promised asset. A contract is binding and will hold weight if taken to court. Proof of the violation is imperative to successfully claim a breach of contract. | Investopedia | |
| bridge financing, bridging loan | Bridge funding, also known as bridge financing, is a form of temporary, intermediate funding intended to cover a business’s short-term expenses until long-term funding is secured. If a business owner needs money fast so that he or she can continue their business’s operations, a bridge loan may be a viable option. However, it’s important for business owners to understand the mechanics of this funding option first. Today we’ll take a closer look at what is bridge funding. | intrepidexecutivegroup | |
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Bridge financing, often in the form of a bridge loan, is an interim financing option used by companies and other entities to solidify their short-term position until a long-term financing option can be arranged. Bridge financing normally comes from an investment bank or venture capital firm in the form of a loan or equity investment. Bridge financing "bridges" the gap between the time when a company's money is set to run out and when it can expect to receive an infusion of funds later on. This type of financing is most normally used to fulfill a company's short-term working capital needs. Bridge financing is also used for initial public offerings (IPO) or may include an equity-for-capital exchange instead of a loan.A bridge loanis a short-term loan used until a person or company secures permanent financing or removes an existing obligation. It allows the user to meet current obligations by providing immediate cash flow. Bridge loans are short term, up to one year, have relatively high interest rates and are usually backed by some form of collateral, such as real estate or inventory. These types of loans are also called bridge financing or a bridging loan. |
Investopedia | ||
| broker | A broker is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. A broker also refers to the role of a firm when it acts as an agent for a customer and charges the customer a commission for its services. | Investopedia | |
| A reinsurance intermediary who negotiates contracts of reinsurance between a reinsured and reinsurer on behalf of the reinsured, receiving commission for placement and other services rendered from the reinsurer. Under the terms of one widely used intermediary clause, premiums paid a broker by a reinsured are considered paid to the reinsurer, but loss payments and other funds (such as premium adjustments) paid a broker by a reinsurer are not considered paid to the reinsured until actually received by the reinsured. | Guy Carpenter | ||
| brokerage |
1. an organization that buys and sells foreign money, shares in companies, etc. for other people. 2. the activity of buying and selling foreign money, shares in companies, etc. for other people, or the money that is charged for doing this. |
cambridgedictionary | |
| bullet payment |
A bullet repayment is a lump sum payment made for the entirety of an outstanding loan amount, usually at maturity. It can also be a single payment of principal on a bond. Loans with bullet repayments are also referred to as balloon loans, and they're commonly used in mortgage and business loans to reduce monthly payments during the term of the loans. |
Investopedia | |
| buy-back transaction | A buyback, also known as a share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available on the open market. Companies buy back shares for a number of reasons, such as to increase the value of remaining shares available by reducing the supply or to prevent other shareholders from taking a controlling stake. | Investopedia | |
| buyer credit | A financial agreement in which a bank, other financial institution, or an export agency in the exporting country extends a loan directly to a foreign buyer or to an institution in the importing country. | ITFA | |
| A financial arrangement under which a lending bank, financial institution, or an export credit agency in the exporting country extends a loan directly to the foreign buyer of exported goods or indirectly through a bank in the buyer's country. The loan helps finance the purchase of goods and services from the exporting country and therefore enables the buyer to make payments to the supplier under the contract. A buyer's credit is a medium- to long-term loan. | ATI | ||
| As an exporter, you can offer your customer abroad attractive financing for their purchases using a buyer credit and ensure your liquidity from the very beginning by drawing on the loan, irrespective of their subsequent repayments. | OEKB | ||
| An arrangement in which an exporter enters into a contract with a buyer, which is financed by means of a loan agreement between a bank in the exporter's country and a bank in the buyer's country. The export credit agency in the exporting country typically provides a guarantee to the lending bank. The exporter can draw on the loan as the work is done and accepted. The international buyer / bank makes loan repayments to the lending bank in accordance with an agreed repayment schedule commencing after the delivery of the goods or services. The key benefit of a buyer credit is the Isabella clause. | NZECO | ||
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Buyer's credit is a short-term loan facility extended to an importer by an overseas lender such as a bank or financial institution to finance the purchase of capital goods, services, and other big-ticket items. The importer, to whom the loan is issued, is the buyer of goods, while the exporter is the seller. Buyer’s credit is a very useful financing method in international trade as it gives importers access cheaper funds compared to what may be available locally. |
investopedia | ||
| A facility in which a guarantee is given by an ECA to a bank in respect of a loan to a foreign borrower to finance a contract relating to the supply of capital goods and services to a buyer abroad. | Berne Union | ||
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Buyer's credit is a short-term loan facility extended to an importer by an overseas lender such as a bank or financial institution to finance the purchase of capital goods, services, and other big-ticket items. The importer, to whom the loan is issued, is the buyer of goods, while the exporter is the seller. Buyer’s credit is a very useful financing method in international trade as it gives importers access cheaper funds compared to what may be available locally. |
Investopedia | ||
| buyer furnished equipment | Equipment furnished by the buyer and incorporated in the aircraft during the manufacture/refurbishment process, on or before delivery, as evidenced by the Bill of Sale from the manufacturer. | OECD | |
| capital goods | Capital goods are tangible assets that one business produces that is in turn used by a second business to produce consumer goods or services. Capital goods include tangible assets, such as buildings, machinery, equipment, vehicles, and tools that an organization uses to produce goods or services. | Investopedia | |
| capitalised interest | Capitalized interest is the cost of borrowing to acquire or construct a long-term asset. Unlike an interest expense incurred for any other purpose, capitalized interest is not expensed immediately on the income statement of a company's financial statements. Instead, firms capitalize it, meaning the interest paid increases the cost basis of the related long-term asset on the balance sheet. Capitalized interest shows up in installments on a company's income statement through periodic depreciation expense recorded on the associated long-term asset over its useful life. | Investopedia | |
| cash advance | Payment from a foreign customer to a exporter prior to actually receiving the exporter’s products. It is the least risky form of payment from the exporter’s perspective. | U.S. Commercial Service | |
| A cash advance is a short-term loan from a bank or an alternative lender. The term also refers to a service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash. Cash advances generally feature steep interest rates and fees, but they are attractive to borrowers because they also feature fast approval and quick funding. | Investopedia | ||
| cash against documents (CAD) | A payment arrangement in which the seller retains title and control of the goods after the shipment. The goods will be released to the buyer or a party designated by the buyer after full payment has been received by the seller. | HKEC | |
| cash with order | Cash with order is used to define the transactions where the cash is paid to the supplier as soon as the order is placed. Since transaction is happening in cash in advance, it becomes binding for both the parties to honor the agreement. Seller is obligated to deliver the goods as per the order once the payment is done. Similarly, Buyer is obligated to accept the order since buyer has already paid for the order. There is a risk associated with this type of payment. | mbaskool | |
| A payment term whereby the buyer remits the money at the time the order is placed. Under this term, the buyer is actually extending credit to the seller. Also called payment in advance. | globalnegotiator | ||
| ceiling, limit | A ceiling is a maximum permissible level in a financial transaction. A ceiling can refer to the highest price, the maximum interest rate, or the largest of some other factor involved in a transaction. | Investopedia | |
| Ceilings are e.g. established for countries where cover facilities have been restricted for risk management reasons. | Berne Union | ||
| certificate of completion of works | A certificate of completion is a document certified by an architect and/or an engineer that a certain construction project has been completed in accordance with the terms, conditions, and specifications contained in the job contract. | businessdictionary | |
| certificate of insurance |
A certificate of insurance (COI) is issued by an insurance company or broke. The COI verifies the existence of an insurance policy and summarizes the key aspects and conditions of the policy. For example, a standard COI lists the policyholder's name, policy effective date, the type of coverage, policy limits, and other important details of the policy. Without a COI, a company or contractor will have difficulty securing clients; most hirers will not want to assume the risk of any costs that might be caused by the contractor or provider. |
Investopedia | |
| certificate of origin | Signed statement required in certain nations attesting to the origin of the export item. Certificates of origin are usually validated by a semiofficial organization, such as a local chamber of commerce. | U.S. Commercial Service | |
| A signed document officiating and certifying the origin of the items being imported or exported with respect to invoiced goods. A free-format document can be used or a specific format such as GSP Form A. | ITFA | ||
|
A certificate of origin (CO) is a document declaring in which country a commodity or good was manufactured. The certificate of origin contains information regarding the product, its destination, and the country of export. Required by many treaty agreements for cross-border trade, the CO is an important form because it can help determine whether certain goods are eligible for import, or whether goods are subject to duties. Customs officials expect the CO to be a separate document from the commercial invoice or packing list. Customs in these countries also expect it to be signed by the exporter, the signature notarized, and the document subsequently signed and stamped by a chamber of commerce. In some cases, the destination customs authority may request proof of review from a specific chamber of commerce. |
Investopedia | ||
| charter agreement | Hire or lease contract between the owner of a vessel (aircraft or ship), and the hirer or lessee (charterer). Under a charterparty, a vessel is rented (in full or in part) for one or more voyages (voyage charter) or for a fixed period (time charter). Normally, the vessel owner retains rights of possession and control while the chartrer has the right to choose the ports of call. Also called charter agreement or charter contract, and written also as charter party. | businessdictionary | |
| claim, loss | An application by the policyholder to the insurer for indemnification of a loss covered under the policy. | HKEC | |
| claims waiting period | The period, usually starting from the due date of payment or intervention order, after the expiry of which a claim may be submitted and the loss is assessed. | ICISA | |
| The period the insured must wait before filing a claim. The period starts on the payment due date and expires as stated in the insurance policy. | ATRADIUS | ||
| clean bill of lading |
A clean bill of lading is a document that declares there was no damage to or loss of goods during shipment. The clean bill of lading is issued by the product carrier after thoroughly inspecting all packages for any damage, missing quantities, or deviations in quality. The clean bill of lading is a type of ocean bill of lading, which is a contract for shipment between a shipper, carrier, and a receiver for goods shipped overseas by water. A bill of lading is a legal document between a shipper and carrier detailing the type, quantity, and destination of the goods being carried. The bill of lading also serves as a receipt of shipment when the goods are delivered at the predetermined destination. |
Investopedia | |
| clearing account | A temporary account that holds costs until they can be transferred elsewhere. For example, a company might use a clearing account to hold revenue and costs when completing year-end fiscal calculations. When the company has finished placing the revenue and costs in the account it can then transfer the amount to the company's net earnings. | businessdictionary | |
| A clearing account is usually a temporary account containing costs or amounts that are to be transferred to another account. An example is the income summary account containing revenue and expense amounts to be transferred to retained earnings at the close of a fiscal period. | wikipedia | ||
| clearing agreement | an agreement between nations as to the method of settlement of commercial accounts that is usually designed to avoid transfer of foreign exchange. | merriam-webster | |
| coinsurance | An arrangement in which more than one insurer covers a risk. Usually, each insurer decides which part of the risk they will underwrite and on what terms. They do not have to follow any other coinsurer. Each co-insurer separately insures its part of the risk and each is a separate contract. | ATI | |
| General term which may stand either for ®parallel insurance, ®joint insurance or ®reinsurance. | Berne Union | ||
| collateral guarantee | Collateral Guarantee means the guarantee to be given by the Collateral Owner in such form as the Lender may approve or require. | lawinsider | |
| collect a debt | Debt collection is the process of pursuing payments of debts owed by individuals or businesses. An organization that specializes in debt collection is known as a collection agency or debt collector.[1] Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed. | 0 | |
| collecting bank | The bank in the buyer’s (drawee’s) country to which the Collection Order and documents are directed. | ITFA | |
| In documentary credit, the bank (usually the buyer's bank) that collects cash payment or a time draft from a buyer, in exchange for bill of lading and/or other documents which enable the buyer to take delivery of the shipment. The collecting bank then forwards the payment to the remitting bank (usually the seller's bank) for eventual remittance to the seller. | businessdictionary | ||
| collection charges | The costs incurred in preventing or minimising the loss or in collection of the amount owing by the buyer. | ICISA | |
| collection measures | It is a measure of the amount collected during a specific period of time against the amount of total receivables during that same period. | thomsonreuters | |
| collection period |
A collection period is the average number of days required to collect receivables from customers. A shorter collection period is considered optimal, since the creditor entity has its funds at risk for a shorter period of time, and also needs less working capital to run the business. However, some entities deliberately allow a longer collection period in order to expand their sales to customers having lower credit quality. The collection period calculation does not include the collection period for non-trade receivables, such as advances to employees, since doing so would skew the result of the calculation. |
accountingtools | |
| commercial bank guarantee (CBG) | A bank guarantee is a type of guarantee from a lending institution. The bank guarantee means a lending institution ensures that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it. A bank guarantee enables the customer, or debtor, to acquire goods, buy equipment or draw down a loan. | Investopedia | |
| commercial contract | A commercial contract refers to a legally binding agreement between parties in which they are obligated to do or restrain from doing particular things. Commercial contracts can be written, verbal, or implied in a formal or an informal manner. Commercial contract can include all aspects of a business, such as hiring, wages, leases, loans and employee safety. A breach of commercial contract takes place when a contracting party fails to live up to the agreements. | uslegal | |
| commercial credit |
Commercial credit is a pre-approved amount of money issued by a bank to a company that can be accessed by the borrowing company at any time to help meet various financial obligations. Commercial credit is commonly used to fund common day-to-day operations and is often paid back once funds become available. Commercial credit can be offered in either a revolving or non-revolving line of credit. Commercial credit is also commonly referred to as a "commercial line of credit" or "business credit." |
Investopedia | |
| Commercial Interest Reference Rate (CIRR) | Interest rates applied to loans supported by ECAs and fixed pursuant to the OECD Consensus. ECAs will then compensate lenders for the difference between the CIRR and any higher open-market rate. | ITFA | |
| The Commercial Interest Reference Rate (CIRR), as defined in the OECD Arrangement, is a reference interest rate for state-subsidized export finance. In the eurozone member countries, there is a single EUR CIRR based on the secondary market yield of prime European government bonds. The CIRR is published on OECD´s website and is valid from the 15th of a month to the 14th of the following month. | OEKB | ||
| The CIRR rates are minimum interest rates fixed on a monthly basis in accordance with an agreement between the OECD countries. Public authorities may not support export credits at lower rates than the CIRR. | NZECO | ||
| CIRRs are interest rates defined in the „Consensus“ and established in accordance with the principle that they should represent final commercial lending interest rates in the domestic market of the currency concerned. | Berne Union | ||
| commercial risk | The risk of non-payment by a non-sovereign or private sector buyer or borrower arising from default, insolvency, and/or failure to take up goods that have been shipped, according to the supply contract. | ITFA | |
| The risk of deterioration in the creditworthiness or financial situation of a buyer, resulting in non-payment of the buyer, not caused by circumstances or occurrences defined as country risk, such as bankruptcy or insolvency and payment default. | HKEC | ||
| One of the two main categories of risk covered by credit insurers (the other is political risk). Commercial risks are linked to a corporate buyer or bank's ability and willingness to pay, and may include insolvency or bankruptcy, or unwillingness to take delivery of the goods (i.e. repudiation). | NZECO | ||
| commission, fee |
A commission is a service charge assessed by a broker or investment advisor for providing investment advice or handling purchases and sales of securities for a client. There are important differences between commissions and fees, at least in the way these words are used to describe professional advisors in the financial services industry. A commission-based advisor or broker makes money by selling investment products such as mutual funds and annuities and conducting transactions with the client's money. A fee-based advisor charges a flat rate for managing a client's money. This may be either a dollar amount or a percentage of assets under management (AUM). |
Investopedia | |
| commissioning |
Project commissioning is the process of assuring that all systems and components of a building or industrial plant are designed, installed, tested, operated, and maintained according to the operational requirements of the owner or final client. A commissioning process may be applied not only to new projects but also to existing units and systems subject to expansion, renovation or revamping. In practice, the commissioning process is the integrated application of a set of engineering techniques and procedures to check, inspect and test every operational component of the project: from individual functions (such as instruments and equipment) up to complex amalgamations (such as modules, subsystems and systems). Commissioning activities in the broader sense are applicable to all phases of the project from the basic and detailed design, procurement, construction and assembly until the final handover of the unit to the owner, sometimes including an assisted operation phase. |
wikipedia | |
| commitment | any statement, in whatever form, whereby the willingness or intention to provide official support is communicated to the recipient country, the buyer, the borrower, the exporter or the financial institution. | OECD | |
| The total of all maximum loan amounts (including the insured interest) multiplied by the cover ratio for all written insurances and guarantees (IP). | SERV | ||
|
1. Accounting: Earmarking or setting-aside of funds in response to a purchase requisition. These funds remain committed (encumbered) until the purchased good or service is paid-for after its receipt, thereby converting the encumbrance into an expenditure. See also obligation. 2. Lending: Written assurance from a lender to a borrower that a specified amount of loan or line of credit will be made available at a certain rate and during a certain period. Lenders charge a commitment fee for this service. 3. Law: Order by which a court directs a person to be confined in a penal or mental health institution. |
businessdictionary | ||
| Any arrangement for or declaration on credit conditions, in whatever form, by means of which the intention or willingness to refinance, insure or guarantee supplier credits or to grant, refinance, insure or guarantee financial credits is brought to the attention of the recipient country, the buyer or the borrower or the financial institution. | Berne Union | ||
| commitment fee | A charge made by the forfaiter for undertaking to forfait a transaction and to hold a discount rate and funds for a specified period of time. The Forfaiter will apply the commitment fee from the date of a firm commitment until the disbursement date, or payment date. | ITFA | |
| A per annum fee applied to undisbursed balances that lenders are committed to lend; the fee is charged until the end of the availability period. | NZECO | ||
|
A commitment fee is a banking term used to describe a fee charged by a lender to a borrower to compensate the lender for its commitment to lend. Commitment fees typically are associated with unused credit lines or undisbursed loans. The lender is compensated for providing access to a potential loan through a commitment fee, since it has set aside the funds for the borrower and cannot yet charge interest. |
investopedia | ||
| standby fee | A fee charged for standby commitment is standby fee. A standby fee is paid to a commercial bank in return for its legal commitment to lend funds that are not advanced. When a loan is not closed within a specified time, standby fee is forfeited. | uslegal | |
| The sum required by a lender to provide a standby commitment. The fee is forfeited should the loan not be closed within a specified time. | allbusiness | ||
| Common Approaches | The current agreement is the OECD Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “Common Approaches”), which was adopted on 28 June 2012 and revised by the OECD Council on 6 April 2016 (OECD/LEGAL/0393). This agreement sets common approaches for undertaking environmental and social due diligence to identify, consider and address the potential environmental and social impacts and risks relating to applications for officially supported export credits as an integral part of Members’ decision-making and risk management systems. While an OECD Recommendation is not legally binding, it expresses the common position or will of the whole OECD memberships, and therefore may entail important political commitment for Member governments. | OECD | |
| common line | An understanding between the Participants to agree, for a given transaction or in special circumstances, on specific financial terms and conditions for official support. The rules of an agreed Common Line supersede the rules of the Arrangement only for the transaction or in the circumstances specified in the Common Line. | OECD | |
| compensation due |
Due compensation means just compensation. It means the compensation which ought to be made. It is the compensation to which a person is entitled. Due compensation is what will make the owner whole pecuniarily for appropriating or injuring his/her property by any invasion of it cognizable by the senses, or by interference with some right in relation to the property, whereby its market value is lessened as the direct result of the public use. [King v. Vicksburg R. & L. Co., 88 Miss. 456 (Miss. 1906)] |
uslegal | |
| completion | Stage in project financing where (after the completion test) the cash flows from the project itself become the primary source of repayment of the loans. Before completion, the sponsors of the project or its turnkey contractor is the primary source. | businessdictionary | |
| completion of the contract | Contract Completion means the schedule Milestone when the Work is completed in accordance with the terms of the Contract Documents and Contractor has satisfied all of its other obligations under the Contract Documents, including but not limited to (1) all governmental authorities have given final, written approval of the Work, (2) a final unconditional certificate of occupancy has been granted and issued to the Owner by the appropriate governmental authorities, (3) the Contractor’s Work is 100 percent complete, and (4) all Punch List items have been completed or corrected, and (5) the Contractor has complied with conditions precedent to final payment and release of retained funds. | lawinsider | |
| composition | Agreement under which creditors accept a fractional payment of their claims as the final settlement. | businessdictionary | |
| comprehensive cover (cover for political and commercial risks) | Widest form of auto insurance protection that (in case of a collision, fire, or theft) covers the (1) insured driver and vehicle, (2) third-party driver and vehicle, and (3) third-party property. Premium is computed usually on the engine size and value of the vehicle, its intended use, and the age and driving record of the driver. Also called comprehensive cover or fully comprehensive insurance. | businessdictionary | |
| concessionaire |
1. Commerce: Grant of exclusive privileges (such as to be the only seller of a good or service) by a government authority or by the owner of a singular property (such as an airport, amusement park, hotel) to a grantee. Also called a concessionaire, the grantee carries out a commercial undertaking (such as a restaurant), and pays a rent or a certain percentage of the sales or earnings to the grantor. 2. Negotiations: Yielding of a position, privilege, or right, by a party to induce the another party to respond similarly by yielding an equivalent position, right, or privilege. |
businessdictionary | |
| concessionality level (CL) | Concessionality Level of Tied Aid：in the case of grants the concessionality level is 100%. In the case of loans, the concessionality level is the difference between the nominal value of the loan and the discounted present value of the future debt service payments to be made by the borrower. This difference is expressed as a percentage of the nominal value of the loan. | OECD | |
| The concessionality level indicates how cheap a loan is when compared to loans issued at the market rate. This measure is important in the case of "soft loans" ("development aid credit"), for which the OECD arrangement requires a basic degree of benefit of at least 35%, and at least 50% in the least developed countries. | OEKB | ||
| The concessionality level is a measure of the "softness" of a credit reflecting the benefit to the borrower compared to a loan at market rate (see grant element). Technically, it is calculated as the difference between the nominal value of a Tied Aid Credit and the present value of the debt service as of the date of disbursement, calculated at a discount rate applicable to the currency of the transaction and expressed as a percentage of the nominal value. | OECD | ||
| condition |
1. Law: An uncertain future act or event, the occurrence of which determines the existence or extent of an interest or right, or liability or obligation; or which initiates, halts, or terminates the performance of a duty. 2. Contracts: The central instrument in a contract. A condition (1) invests or divests the rights and duties of the parties to the contract, or (2) stipulates that the occurrence or nonoccurrence of a certain event creates or terminates a contract. |
businessdictionary | |
| Conditional Insurance Cover | Official support, which in the case of a default on payment for defined risks provides indemnification to the beneficiary after a specified waiting period; during the waiting period the beneficiary does not have the right to payment from the Participant. Payment under conditional insurance cover is subject to the validity and the exceptions of the underlying documentation and of the underlying transaction. | OECD | |
| confirmed irrevocable letter of credit (CILC) | Irrevocable letter of credit：A letter of credit in which the bank guarantees that the exporter will be paid if the required documents are presented, and the terms and conditions complied with. An irrevocable letter of credit cannot be changed or cancelled without the consent of all parties involved. | NZECO | |
| confirming house | Company based in a foreign country that acts as a foreign buyer’s agent and places confirmed orders with exporters. The confirming house guarantees payment to the exporters. | U.S. Commercial Service | |
| confiscation | Confiscation (from the Latin confiscare "to consign to the fiscus, i.e. transfer to the treasury") is a legal form of seizure by a government or other public authority. The word is also used, popularly, of spoliation under legal forms, or of any seizure of property as punishment or in enforcement of the law. | wikipedia | |
| consignee | The person to whom goods or title to goods are to be delivered. | ITFA | |
| The person / company / bank to which the goods are delivered - usually to the importer or the Collecting Bank. | NZECO | ||
| consignment note | Document prepared by a consignor and countersigned by the carrier as a proof of receipt of consignment for delivery at the destination. Used as an alternative to bill of lading (specially in inland transport), it is generally neither a contract of carriage nor a negotiable instrument. | businessdictionary | |
| consignment stock | Consignment stock is stock legally owned by one party, but held by another, meaning that the risk and rewards regarding to the said stock remains with the first party while the second party is responsible for distribution or retail operations. | wikipedia | |
| consolidation period (Paris Club) | In Paris Club restructuring agreements, the period in which debt-service payments to be restructured (the “current maturities consolidated”) have fallen or will fall due. The beginning of the consolidation period may precede, coincide with, or come after the date of the Agreed Minute. The standard consolidation period is one year, but sometimes debt payments over a two- or three-year period have been consolidated, corresponding with a multiyear arrangement with the IMF. | OECD | |
| constructional works cover | Type of cover specially tailored to suit the needs of the construction industry, which in addi-tion to the amounts receivable provides cover for other types of risks which may arise in connection with political events during construc-tion abroad, e.g. loss of construction equipment | Berne Union | |
| consular invoice |
A consular invoice is a document certifying a shipment of goods and shows information such as the consignor, consignee, and value of the shipment. Generally, a consular invoice can be obtained through a consular representative of the country you're shipping to and must be certified by the consul of the country of destination, who will stamp and authorize the invoice. The consular invoice is required by some countries to facilitate customs and collection of taxes. The process of submitting and authorizing a consular invoice is called consularization and it can help speed up the process of importing goods into a new country. |
Investopedia | |
| contingencies |
A contingency is a potential negative event that may occur in the future, such as an economic recession, natural disaster, fraudulent activity or a terrorist attack. Contingencies can be prepared for, but often the nature and scope of such negative events are unknowable in advance. In finance, managers often attempt to identify and plan for any contingencies that they feel may occur with any significant likelihood using predictive models. To mitigate risk, financial managers often err on the conservative side, assuming slightly worse-than-expected outcomes, and arranging a company's affairs so that it can weather negative outcomes with the least distress possible. Common ways of dealing with contingencies include purchasing insurance policies that will pay off if a particular set of contingencies strikes - for example, property insurance against fire or wind damage. Contingencies related to financial investments can be mitigated through the use of hedging strategies, such as stop-loss orders, protective put options or asset diversification. These strategies, however, come at a cost, usually referred to as a premium, which must be paid regularly to maintain the protective coverage even if the contingency event never occurs. |
Investopedia | |
| contingent liability | A potential liability which crystallizes into an actual liability on an entity’s balance sheet once various uncertainties have been resolved. A contingent liability is not yet an actual, confirmed liability. | ITFA | |
| A conditional obligation of one party to another, triggered by specified events. | ICISA | ||
| contract currency, contractual currency | Principal currency for the contract. | Berne Union | |
| contract frustration | Impossibility to perform a trade contract. | ICISA | |
| contract price | Mutually agreed upon total amount that a principal (client or project owner) pays to a contractor on completion of the contract, in accordance with contract terms and conditions and their subsequent modifications (if any). Also called contract sum. | businessdictionary | |
| contractor | A contractor is a person or company that performs work on a contract basis. | wikipedia | |
| controlling interest | Controlling interest is when a shareholder, or a group acting in kind, holds a majority of a company's voting stock. | Investopedia | |
| conversion risk | The risk of an inability to convert local currency into the currency in which a debt is denominated. | ITFA | |
| 1. The risk of revocation by the buyer’s government of the buyer’s pre-existing legal right to make payment in an invoiced currency other than the currency of the buyer country, at any rate of exchange; 2. Political risk resulting from an event outside the insured’s country preventing or delaying the transfer of funds paid by the debtor to a local bank. | ICISA | ||
| Government or central bank currency measures that prevent the buyer from making a payment. The buyer in such cases may have deposited equivalent funds in local currency, but the central bank will not release the currency required. Also the risk that an official or legal prohibition on payments may prevent a foreign buyer from making a payment by the due date. | SERV | ||
| conversion rate | A conversion rate is the ratio between two currencies, most commonly used in foreign exchange markets, which designates how much of one currency is needed to exchange for the equivalent value of another currency. Conversion rates fluctuate regularly for all currencies traded in forex markets. Forex spot prices are quoted continuously with one day's break over weekends. | Investopedia | |
| convertibility | Convertibility is the quality that allows money or other financial instruments to be converted into other liquid stores of value. Convertibility is an important factor in international trade, where instruments valued in different currencies must be exchanged. | wikipedia | |
| convertible/transferable currency |
A currency that can be readily bought or sold without government restrictions, in order to purchase another currency. A convertible currency is a liquid instrument when compared to currencies tightly controlled by a central bank or other regulating authority. A convertible currency is often referred to a hard currency. |
Investopedia | |
| cost, insurance, freight (CIF) | Cost, insurance, and freight to a named overseas post. The seller quotes a price for the goods shipped by ocean (including insurance), all transportation costs, and miscellaneous charges to the point of debarkation from the vessel. | U.S. Commercial Service | |
| An Incoterm that represents an exporter's requirement to cover the cost of transport to the port of destination, and to provide appropriate marine insurance coverage. The passing of title (ownership and risk) occurs when the goods have been delivered to the marine carrier or have been delivered on board the shipping vessel, depending upon the terms of the contract. | NZECO | ||
| Cost, Insurance, and Freight (CIF) is an expense paid by a seller to cover the costs, insurance, and freight against the possibility of loss or damage to a buyer's order while it is in transit to an export port named in the sales contract. Until the loading of the goods onto a transport ship is complete, the seller bears the costs of any loss or damage to the product. Further, if the product requires additional customs or export paperwork or requires inspections or rerouting, the seller must cover these expenses. Once the freight loads, the buyer becomes responsible for all other costs. | Investopedia | ||
| cost escalation | Cost escalation can be defined as changes in the cost or price of specific goods or services in a given economy over a period. This is similar to the concepts of inflation and deflation except that escalation is specific to an item or class of items (not as general in nature), it is often not primarily driven by changes in the money supply, and it tends to be less sustained. While escalation includes general inflation related to the money supply, it is also driven by changes in technology, practices, and particularly supply-demand imbalances that are specific to a good or service in a given economy. | wikipedia | |
| cost plus fee | The cost-plus-fee is also referred to by the abbreviation of CPF, and represents a variant of a cost reimbursable contract in which the buyer provides reimbursement to the selling party for the allowable costs that have been accrued by the seller in the commission of the service, the creation, manufacture, delivery of the product, or in any other performance of the contracted work. In addition to this reimbursement, the seller also receives a fee that has been previously determined and calculated as a percentage measure of the total costs. The fee in these situations will tend to vary with the actual costs. Cost-plus-fee is advantageous to the seller because it allows for some baseline costs and expenditures to be reimbursed in a more guaranteed way, but also allows for the opportunity to modify fees based on percentages. As such, as budgets swell the percentage remains fixed, however the resulting fee grows accordingly. | projectmanagementknowledge | |
| cost price, prime costs | In retail systems, the cost price represents the specific value that represents unit price purchased. This value is used as a key factor in determining profitability, and in some stock market theories it is used in establishing the value of stock holding. | wikipedia | |
| Self-cost accruing to the exporter/manufacturer for production of the plants/goods and covered under the pre-shipment/manufacturing risk. | Berne Union | ||
| costs incurred | In accounting, an expense that has been incurred during the course of business, and that is a liability until it is paid. | businessdictionary | |
| An incurred cost in accrual accounting is the moment in time when a resource or asset is consumed and an expense is recorded. In other words, it’s when a company uses an asset or becomes liable for the use of an asset in the production of a product. These assets cease to be a resource and are converted into an expense. | myaccountingcourse | ||
| counterguarantee, back-to-back guarantee | A counter guarantee protects the bond-issuing bank against the risk that the exporter will be unable or unwilling to pay if the contract bond is called. | SERV | |
| Guarantee (standby credit) arranged to secure a contractor's or seller's performance at the same time a guarantee (standby credit) is arranged to secure the owner's or buyer's payment. Also called back to back guarantee or reciprocal credit. | businessdictionary | ||
| A Back to Back Guarantee (also known as back-to-back credit or reciprocal credit) is two letters of credit issued by two banks, one guaranteeing payment by a seller and the other guaranteeing performance by a buyer that is the arrangement securities for a contractor or seller’s performance at the same time a guarantee is arranged to the owner or buyer’s payment. The Back to Back Guarantee is to protect the interests of both parties involved in the transaction from incurring a loss, or at least minimizing that loss to a great degree. | theprojectdefinition | ||
| countertrade | General expression meaning the sale or barter of goods on a reciprocal basis. There may also be multilateral transactions involved. | U.S. Commercial Service | |
| The umbrella term referring to a growing number of trading and financing techniques in which payment is made either wholly or partly in the form of goods. | ITFA | ||
| Countertrade is a reciprocal form of international trade in which goods or services are exchanged for other goods or services rather than for hard currency. This type of international trade is more common in developing countries with limited foreign exchange or credit facilities. Countertrade can be classified into three broad categories: barter, counterpurchase, and offset. | Investopedia | ||
| Goods against money with other goods as security. | Berne Union | ||
| country ceiling/limit | The term "country limit" refers to the aggregate limit that a bank places on all borrowers in a given foreign country. Country limits typically apply to all borrowers, regardless of whether they are public or private, individual or institutional. They also apply to all kinds of loans, including mortgages, business loans and lines of credit, personal loans, institutional loans and any other forms of borrowing. The creditworthiness of the borrower and the unit of currency involved are also irrelevant for the purposes of this restriction. | Investopedia | |
| country risk | Country risk refers to the uncertainty associated with investing in a particular country, and more specifically the degree to which that uncertainty could lead to losses for investors. This uncertainty can come from any number of factors including political, economic, exchange-rate, or technological influences. In particular, country risk denotes the risk that a foreign government will default on its bonds or other financial commitments increasing transfer risk. In a broader sense, country risk is the degree to which political and economic unrest affect the securities of issuers doing business in a particular country. | Investopedia | |
| Refers to risks related to the importing country and includes political risks (e.g. transfer restrictions, disturbances or war) and catastrophes (e.g. natural disasters such as storms, earthquakes and epidemics). | ATRADIUS | ||
| country risk classification | (OECD Country Category) The OECD classifies countries for political risk insurance for medium and long-term export credits in categories from 0 (low risk) to 7 (high risk). This risk assessment is based on the minimum premium, which is binding for all OECD export credit agencies. | OEKB | |
| covenant | In legal and financial terminology, a covenant is a promise in an indenture, or any other formal debt agreement, that certain activities will or will not be carried out. Covenants in finance most often relate to terms in a financial contracting, such as a loan document or bond issue stating the limits at which the borrower can further lend. | Investopedia | |
| cover | Provision of export credit guarantee/insurance against risks of payments delays or non-payments relating to export transactions. Cover is usually provided for commercial and political risk, from date of contract or date of shipment. | ITFA | |
| Cover in the context of finance is used to refer to any number of actions that reduce an investor’s exposure. The term cover is distinct from coverage, which, in the world of finance, refers to insurance coverage in addition to referring to the financial ratios that measure a company's margin of safety in servicing its debt and making dividend payments. Cover can also be used without context to simply mean the act of protecting overall portfolio value, as in providing cover against market volatility. | Investopedia | ||
| cover of interest | The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest on its outstanding debt. The interest coverage ratio may be calculated by dividing a company's EBIT during a given period by the company's interest payments due within the same period. The Interest coverage ratio is also called “times interest earned.” Lenders, investors, and creditors often use this formula to determine a company's riskiness relative to its current debt or for future borrowing. | Investopedia | |
| credit approval | Credit approval is the process a business or an individual undergoes to become eligible for a loan or pay for goods and services over an extended period. Granting credit approval depends on the willingness of the creditor to lend money in the current economy and that same lender's assessment of the ability and willingness of the borrower to return the money or pay for the goods obtained—plus interest—in a timely fashion. Typically, businesses seek approval to obtain loans and also grant approval for loans to their customers. | referenceforbusiness | |
| cost of borrowing | The total charge for taking on a debt obligation that can involve interest payments and other financing fees. The borrowing cost for a business tends to go up when prevailing market interest rates are rising during times of economic expansion and increased inflation, even if its credit standing remains excellent. | businessdictionary | |
| credit enhancement | Credit enhancement is a strategy for improving the credit risk profile of a business, usually to obtain better terms for repaying debt.In the financial industry, credit enhancement may be used to reduce the risks to investors of certain structured financial products.[Important: Credit enhancement reduces the default risk of the company's debt and thus can make it eligible for a lower interest rate.] | Investopedia | |
| credit limit | The maximum amount of loss that an insurer may be liable on a particular buyer. It may contain additional conditions of cover forming part of the policy. | HKEC | |
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The term credit limit refers to the maximum amount of credit a financial institution extends to a client. A lending institution extends a credit limit on a credit card or a line of credit. Lenders usually set credit limits based on information in the application of the person seeking credit. A credit limit is one of the factors that affect consumers' credit scores and can impact their ability to get credit in the future. |
Investopedia | ||
| credit period | The period of time given to the buyer to pay for the delivered goods and services under an export-credit transaction. | EUROPEAN COMMISSION | |
| (Payment term ,Credit period, Credit term) 1.The period after delivery or shipment of goods or after rendering of services at the expiry of which invoices are due to be paid; 2.the period of time provided by the insured to the buyer for payment for delivered goods or services. | ICISA | ||
| The period from the time of delivery or acceptance of goods, or from the commissioning of the project, until repayment is complete. Maximum credit periods are set for repayment periods in respect of certain countries and/or industries, in accordance with the OECD Consensus Arrangement and other international guidelines. | NZECO | ||
| The credit period is the number of days that a customer is allowed to wait before paying an invoice. The concept is important because it indicates the amount of working capital that a business is willing to invest in its accounts receivable in order to generate sales. Thus, a longer credit period equates to a larger investment in receivables. The measure can also be compared to the credit period of competitors, to see if other companies are offering different terms to their customers | accountingtools | ||
| credit rating | Credit ratings are established and monitored by rating agencies (i.e. Standard & Poors), which consider a variety of factors to determine a company's health, financial stability and its investment value. Ratings are a measure of risk—an assessment of a company's ability and willingness to repay loans in full and on time. The higher the credit rating, the higher the level of confidence in repayment—and the lower the borrowing interest rate the company has to pay on a loan. | NZECO | |
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A credit rating is a quantified assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money — an individual, corporation, state or provincial authority, or sovereign government. Individuals' credit is scored from by credit bureaus such as Experian and TransUnion on a 3-digit numerical scale using a form of Fair Isaac (FICO) credit scoring. Credit assessment and evaluation for companies and governments is generally done by a credit rating agency such as Standard & Poor’s (S&P), Moody’s, or Fitch. These rating agencies are paid by the entity that is seeking a credit rating for itself or for one of its debt issues. |
Investopedia | ||
| credit report |
A credit report is a detailed breakdown of an individual's credit history prepared by a credit bureau. Credit bureaus collect financial information about individuals and create credit reports based on that information, and lenders use the reports along with other details to determine loan applicants' creditworthiness. In the United States, there are three major credit reporting bureaus: Equifax, Experian, and TransUnion. Each of these reporting companies collects information about consumers' personal financial details and their bill-paying habits to create a unique credit report; although most of the information is similar, there are often small differences between the three reports. |
Investopedia | |
| credit risk | Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations. Traditionally, it refers to the risk that a lender may not receive the owed principal and interest, which results in an interruption of cash flows and increased costs for collection. Although it's impossible to know exactly who will default on obligations, properly assessing and managing credit risk can lessen the severity of loss. Interest payments from the borrower or issuer of a debt obligation are a lender's or investor's reward for assuming credit risk. | Investopedia | |
| The risk that an exporter/bank will not receive the agreed contract amount or ot the entire amount, or will receive the contract amount only after a long delay. | ATRADIUS | ||
| credit/loan guarantee | A loan guarantee, in finance, is a promise by one party (the guarantor) to assume the debt obligation of a borrower if that borrower defaults. A guarantee can be limited or unlimited, making the guarantor liable for only a portion or all of the debt. | wikipedia | |
| creditor |
A creditor is an entity (person or institution) that extends credit by giving another entity permission to borrow money intended to be repaid in the future. A business who provides supplies or services to a company or an individual and does not demand payment immediately is also considered a creditor, based on the fact that the client owes the business money for services already rendered. Creditors can be classified as either personal or real. People who loan money to friends or family are personal creditors. Real creditors such as banks or finance companies have legal contracts with the borrower, sometimes granting the lender the right to claim any of the debtor's real assets (e.g., real estate or cars) if they fail to pay back the loan. |
Investopedia | |
| (credits evidenced by) negotiable instruments | A negotiable instrument is (a) a guarantee, promise, or obligation (b) made by a specified party (c) to pay an exact amount (d) either on demand, or at a set time. Such instruments are typically memorialized in, and evidenced by, a document or contract which details a promisor’s obligation to pay money without condition either on demand or at a future date. The expression of the obligation often includes, but does not have to, a description of how the obligation arose and the party to whom the obligation is owed. The instrument, and the right to collect payment on the instrument, can be transferred by whomever has rightful, legal title to the instrument. Therefore, while the promisor always retains the obligation to pay, person to whom the obligation is owed may change depending on who holds the instrument. | ITF | |
| creditworthiness |
Creditworthiness is how a lender determines that you will default on your debt obligations, or how worthy you are to receive new credit. Your creditworthiness is what creditors look at before they approve any new credit to you. Creditworthiness is determined by several factors including your repayment history and credit score. Some lending institutions also consider available assets and the number of liabilities you have when they determine the probability of default. |
Investopedia | |
| creeping expropriation | The gradual removal of property rights from a foreign investor through a series of government initiatives, including new legislation, increases in tax rates or royalty payments, the cumulative effect of which is to reduce the economic value of the project to the investor. Foreign investors can protect themselves from the effects of these initiatives by: Taking advantage of any applicable of bilateral investment treaties; Negotiating stabilization clauses with the government; Obtaining political risk insurance. | thomsonreuters practicallaw | |
| cross-default clause | Common stipulation in loan agreements under which a bank has a right to deny access to balances in any or all loan accounts to a borrower (with several loans at the same bank) even if only one loan goes into default. In fact, a bank can apply all available balance(s) in all account(s) of the borrower to satisfy any loan in default. Bankers justify this clause on the logic that a default sours the bank client relationship, not a just a loan agreement. See also cross collateral clause. | businessdictionary | |
| currency swap | A currency swap, sometimes referred to as a cross-currency swap, involves the exchange of interest – and sometimes of principal – in one currency for the same in another currency. Interest payments are exchanged at fixed dates through the life of the contract. It is considered to be a foreign exchange transaction and is not required by law to be shown on a company's balance sheet. | Investopedia | |
| An arrangement between two parties to exchange interest obligations or receipts in different currencies. The principal amounts are re-exchanged at maturity. The exchange rate is set at the beginning of the transaction and is fixed for the entire life. | Berne Union | ||
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Cross-currency swapsare an over-the-counter (OTC) derivative in a form of an agreement between two parties to exchange interest payments and principal denominated in two different currencies. In a cross-currency swap, interest payments and principal in one currency are exchanged for principal and interest payments in a different currency. Interest payments are exchanged at fixed intervals during the life of the agreement. Cross-currency swaps are highly customizable and can include variable, fixed interest rates, or both. Since the two parties are swapping amounts of money, the cross-currency swap is not required to be shown on a company's balance sheet. |
Investopedia | ||
| customs bond |
A Customs bond is a contract between three parties (Customs, a principal (i.e. an importer), and a surety) to ensure that all the duties and fees associated with the rules and regulations of importing or other Customs activities are paid to Customs by the principal. A Customs bond is a requirement to import into the US as per US Customs regulations, and as such an importer should obtain a bond through a reputable and reliable company. |
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