Comprehensive Glossary of Trade Finance and SBLC Terms

1. Acceptance Credit
A letter of credit providing deferred payment, allowing buyers more time to fulfill obligations while giving exporters payment security. Commonly used to improve cash flow in international trade transactions.

2. Advance Payment Bond
A financial guarantee issued by a bank protecting buyers who pay suppliers upfront. Essential in construction contracts and large international projects to mitigate supplier default risks.

3. Advance Payment Guarantee
A bank-issued guarantee safeguarding buyers against the non-delivery of goods or services after an upfront payment. Frequently required in international procurement and infrastructure projects.

4. Advising Bank
The bank responsible for notifying the beneficiary of the issuance of a letter of credit. This intermediary role is vital in ensuring document authenticity in cross-border trade finance.

5. Applicant
The party requesting a letter of credit or bank guarantee, typically the importer or buyer. Understanding the applicant’s role is fundamental in structuring trade finance transactions securely.

6. Assignment of Proceeds
An arrangement allowing beneficiaries of a letter of credit to transfer payment rights to third parties. Widely used in structured trade finance to improve liquidity for exporters.

7. Aval
A guarantee by a bank endorsing the payment of a bill of exchange. Often utilized to enhance creditworthiness and facilitate smoother international trade payments.

8. Back-to-Back Letter of Credit
A secondary letter of credit issued using a primary LC as collateral. Commonly employed by intermediaries or trading companies engaging in multi-party international transactions.

9. Bank Guarantee
A commitment issued by banks ensuring the fulfillment of contractual obligations if the applicant defaults. Crucial for securing trade agreements and international business transactions.

10. Beneficiary
The party entitled to receive funds under a letter of credit or guarantee, usually the exporter or service provider. Understanding beneficiary rights is key in mitigating trade risks.

11. Bid Bond
A guarantee ensuring a bidder’s commitment to honor a contract if awarded. Standard in international tenders, particularly construction and public procurement.

12. Bill of Exchange
A legally binding, written order requiring one party to pay a fixed sum to another. Frequently used to settle international trade transactions with deferred payments.

13. Bill of Lading (B/L)
A transport document confirming receipt, shipment, and ownership of goods. Critical in international logistics and required for letter of credit transactions.

14. Cash Against Documents (CAD)
A payment method where the buyer pays upon receipt of shipping documents. Popular in trade transactions with moderate risk between established partners.

15. Clean Bill of Lading
A transport document indicating goods were received without damage. Vital for exporters to ensure smooth payment under letters of credit.

16. Completion Bond
A financial guarantee ensuring projects (e.g., infrastructure) are completed within budget and timeline. Essential to manage risk in international construction deals.

17. Confirming Bank
An additional bank guaranteeing payment alongside the issuing bank in a letter of credit transaction. Essential in mitigating risk from unfamiliar or high-risk jurisdictions.

18. Counter Guarantee
A guarantee provided by one bank to support another bank’s primary guarantee. Used in cross-border trade to manage risk between international financial institutions.

19. Customs Bond
A guarantee ensuring importers will pay customs duties and taxes. Crucial for smooth international logistics and regulatory compliance in global trade.

20. Demand Guarantee
A bank guarantee payable immediately upon demand by the beneficiary. Commonly required in international contracts to ensure quick compensation without lengthy disputes.

21. Demurrage
A charge for delayed loading/unloading of cargo beyond agreed timelines. Relevant in shipping contracts and international logistics management.

22. Documentary Collection
A trade finance method where banks exchange shipping documents against payment. Useful for managing risks in trusted trade relationships.

23. Documentary Credit (Letter of Credit)
A bank-issued guarantee of payment upon presentation of compliant trade documents. Fundamental in international trade for managing payment risks securely.

24. Evergreen Letter of Credit
An automatically renewable letter of credit. Suitable for ongoing international supplier relationships requiring long-term payment guarantees.

25. Export Credit Agency (ECA)
A government-backed agency providing financing and insurance to exporters. Essential for facilitating international trade into higher-risk markets.

26. Factoring
A financing service where exporters sell receivables at a discount for immediate liquidity. Crucial in trade finance to improve cash flow without additional debt.

27. Forfaiting
Export finance technique involving selling medium to long-term receivables at a discount. Highly effective for securing immediate liquidity in capital-intensive international exports.

28. Forward Contract
A customized agreement to buy or sell currency at a future date at a fixed rate. Essential for managing foreign exchange risks in global trade operations.

29. Guarantee Facility
A pre-approved credit line enabling issuance of multiple guarantees. Convenient for frequent users of guarantees in global trade transactions.

30. ICC (International Chamber of Commerce)
Global organization defining international trade standards, including Incoterms and UCP 600. Key authority ensuring uniform practices in trade finance.

31. Incoterms®
International rules published by ICC defining trade responsibilities between buyers and sellers. Critical for structuring international contracts and managing trade risk.

32. Irrevocable Letter of Credit
A letter of credit that cannot be changed without consent from all parties involved. Preferred in international transactions for assured payment security.

33. Issuing Bank
Bank creating and issuing the letter of credit at the request of the buyer. Essential for facilitating secure and compliant international trade payments.

34. Maintenance Bond
Guarantee ensuring contractor repairs defects post-project completion. Common in international infrastructure projects to maintain quality standards.

35. Non-Recourse Financing
Financing secured solely by collateral, limiting the borrower's obligations. Commonly used in structured trade finance to isolate transaction risk.

36. Open Account
Trade arrangement allowing goods shipment with deferred payment. Used in international trade among highly trusted partners with low payment risk.

37. Packing Credit
Short-term finance provided to exporters to cover costs before shipment. Important in international trade for improving exporters’ cash flow.

38. Performance Bond
Guarantee ensuring contractual obligations are fulfilled. Essential in international construction and large-scale project contracts.

39. Pre-Export Financing
Credit facilities provided to exporters ahead of shipment. Crucial for managing liquidity in export-oriented businesses.

40. Retention Bond
Guarantee replacing retention money withheld by buyers. Helps maintain liquidity for international contractors without reducing buyer security.

41. Revolving Letter of Credit
An LC allowing multiple transactions within a defined limit. Ideal for continuous international trade dealings with regular suppliers.

42. SBLC (Standby Letter of Credit)
A bank guarantee activated if the applicant fails contractual obligations. Widely used in trade finance as security for performance and payments.

43. Supply Chain Finance
Financing method optimizing working capital in global supply chains. Increasingly popular among multinational corporations to streamline payments.

44. SWIFT MT760
SWIFT message used for issuing bank guarantees or standby LCs. Essential for secure communication of trade finance instruments globally.

45. SWIFT MT799
SWIFT message format for preliminary bank-to-bank communication. Often precedes issuance of trade finance instruments like guarantees or LCs.

46. Trade Credit Insurance
Insurance protecting exporters from buyer non-payment risks. Vital tool to secure international trade transactions.

47. Transferable Letter of Credit
An LC allowing the beneficiary to transfer rights partially or entirely to third parties. Useful in complex international supply chains.

48. UCP 600
ICC-published universal rules governing letters of credit. Crucial to ensure uniform interpretation and practice in global trade finance.

49. Uniform Rules for Demand Guarantees (URDG 758)
ICC rules standardizing practices for demand guarantees. Important reference for structuring bank guarantees in international trade.

50. Usance Letter of Credit
Deferred payment LC providing buyers extended payment terms. Helps manage importer liquidity while securing exporter payment.