Book a demo
Skip to content

Glossary

Export finance terms

65 terms

Definitions of export finance terms for bank credit desks: ECA cover, buyer and supplier credits, guarantees and premium, each cited to the official record.

A

  • Advance payment guarantee

    An advance payment guarantee secures repayment of a contract mobilisation advance, usually as a reducing demand guarantee.

  • Adverse media screening

    Adverse media screening reviews public news and open sources for financial crime, corruption or other serious misconduct linked to a customer or owner.

B

  • Banker's acceptance

    A banker's acceptance is a time draft accepted by a bank, creating an unconditional promise to pay a stated sum at maturity.

  • Basel III

    Basel III is the Basel Committee's post-crisis package of minimum capital, leverage and liquidity standards for internationally active banks.

  • Beneficial ownership

    Beneficial ownership identifies the natural persons who ultimately own or control a legal person or on whose behalf a transaction is conducted.

  • Berne Union

    The Berne Union is the international association for export credit and investment insurers, spanning official ECAs, multilaterals and private underwriters.

  • Bid bond

    A bid bond is tender security, usually a demand guarantee, that compensates the employer if the bidder fails to honour a winning bid.

  • Bookrunner

    A bookrunner is the syndication role that controls primary distribution of a loan and the final composition of the lending syndicate.

  • Borrowing base

    A borrowing base is the collateral-derived ceiling on revolving advances, calculated from eligible assets after advance rates and reserves.

  • Buyer credit

    Buyer credit is bank or official financing to an overseas buyer so the exporter is paid while the buyer repays over time.

  • Buyer credit guarantee

    A buyer credit guarantee is official ECA cover of a bank loan to an overseas buyer so an exporter can be paid while the buyer repays over time.

C

  • Commercial interest reference rate (CIRR)

    The commercial interest reference rate (CIRR) is the OECD Arrangement minimum fixed interest rate for officially supported export credits by currency.

  • Commercial risk

    Commercial risk is the risk of non-payment on an export credit caused by the buyer's insolvency, bankruptcy or protracted default.

  • Comprehensive cover

    Comprehensive cover is ECA insurance or guarantee protection against both commercial and political risks of non-payment on an export credit.

  • Confirmed letter of credit

    A confirmed letter of credit adds a second bank's irrevocable undertaking to honour or negotiate a complying presentation.

  • Country risk

    Country risk is the risk that a sovereign or host-country environment prevents or delays repayment of external debt or cross-border obligations.

  • Currency inconvertibility

    Currency inconvertibility is the inability to convert local currency into hard currency, or to transfer hard currency abroad, due to government action.

  • Customer due diligence

    Customer due diligence is the anti-money-laundering process to identify and verify customers and beneficial owners and monitor the business relationship.

D

  • Debt service coverage ratio (DSCR)

    Debt service coverage ratio (DSCR) measures cash flow available for debt service relative to scheduled principal and interest.

  • Demand guarantee

    A demand guarantee is an independent undertaking to pay on a complying demand, commonly governed by ICC URDG 758.

  • Documentary collection

    A documentary collection is bank handling of financial and commercial documents to obtain payment or acceptance under URC 522.

E

  • EBRD

    EBRD is the European Bank for Reconstruction and Development, a multilateral bank financing transition to market economies in its regions of operation.

  • ECA premium

    An ECA premium is the fee an export credit agency charges for insurance or guarantee cover, floored by OECD minimum premium rates where they apply.

  • EXIM (Export-Import Bank of the United States)

    EXIM is the official US export credit agency, providing loans, guarantees and insurance to support US exports when private finance is unavailable.

  • Export credit agency (ECA)

    An export credit agency (ECA) is a public body that supports national exports with insurance, guarantees or official financing.

  • Export credit guarantee

    An export credit guarantee is official ECA cover that protects a bank or exporter against non-payment on an export credit.

  • Export credit insurance

    Export credit insurance is official or private cover that indemnifies an exporter or lender against non-payment on an export contract.

  • Expropriation risk

    Expropriation risk is the risk of loss from host-government measures that deprive an investor or lender of ownership, control or essential rights.

F

  • Facility agent

    A facility agent is the administrative bank that channels payments, notices and compliance information between borrower and syndicate.

  • Factoring

    Factoring is a receivables finance contract in which a supplier assigns trade debts to a factor that finances, ledgers, collects or covers default.

  • FATF

    FATF is the Financial Action Task Force, the inter-governmental body that sets and monitors global AML and counter-terrorist financing standards.

  • Force majeure

    Force majeure is an extraordinary impediment beyond a party's reasonable control that prevents or impedes contractual performance under agreed conditions.

  • Forfaiting

    Forfaiting is without-recourse discounting of an exporter's future trade receivables evidenced by transferable payment instruments.

H

  • Hermes cover (Hermesdeckung)

    Hermes cover is the common name for German federal export credit guarantees that protect exporters and banks against commercial and political defaults.

I

  • Interest make up

    Interest make up is official interest-rate support that lets banks offer fixed CIRR export credits while hedging floating funding costs.

  • ISP98

    ISP98 is the ICC International Standby Practices, Publication No. 590, the rule set written specifically for standby letters of credit.

K

  • Know your business (KYB)

    Know your business (KYB) is customer due diligence applied to legal-person customers, including ownership, control and nature of business.

  • Know your customer (KYC)

    Know your customer (KYC) is the industry label for identifying and verifying customers and beneficial owners under customer due diligence rules.

L

  • Legal entity identifier (LEI)

    A legal entity identifier is a unique 20-character code that identifies a legal entity in financial markets under the ISO 17442 standard.

  • Letter of credit

    A letter of credit is an irrevocable bank undertaking to honour a complying presentation of documents under agreed credit terms.

M

  • Mandated lead arranger

    A mandated lead arranger is the bank appointed to structure, negotiate and syndicate a loan facility for the borrower.

  • MIGA (Multilateral Investment Guarantee Agency)

    MIGA is the Multilateral Investment Guarantee Agency, the World Bank Group insurer of non-commercial risks for investment into developing members.

  • MIGA cover

    MIGA cover is Multilateral Investment Guarantee Agency political risk insurance and credit enhancement for investment into developing members.

N

  • National content requirements

    National content requirements set the minimum home-country content an ECA expects in an export contract before granting official support.

O

  • OECD Arrangement

    The OECD Arrangement sets disciplines on officially supported export credits among its Participants for repayment terms of two years or more.

  • OECD country risk classification (CRC)

    The OECD country risk classification places countries in categories 0 to 7 to set minimum premiums for officially supported export credits.

P

  • Paris Club

    The Paris Club is an informal group of official bilateral creditors that coordinates sovereign debt treatments for countries facing payment difficulties.

  • Performance bond

    A performance bond is contract security that supports proper performance, often issued as a bank demand guarantee under URDG 758.

  • Political risk insurance (PRI)

    Political risk insurance covers investors and lenders against defined non-commercial risks such as expropriation and transfer restriction.

  • PSC register

    The PSC register records people with significant control of a UK company, LLP or eligible Scottish partnership, including ownership and control conditions.

R

  • Restructuring vs rescheduling (Paris Club)

    Restructuring vs rescheduling contrasts broader debt treatment, including reduction, with changing payment terms on existing claims.

  • Retention bond

    A retention bond is a guarantee that replaces cash retention, securing defect liability after taking over of the works.

  • Risk participation

    A risk participation is an unfunded transfer of credit risk on a loan, where the participant reimburses the grantor if the borrower fails to pay.

S

  • Sanctions screening

    Sanctions screening checks customers, counterparties and transactions against official sanctions lists to identify prohibited parties or dealings.

  • Standby letter of credit

    A standby letter of credit is an irrevocable, independent bank undertaking payable against documents if the applicant defaults.

  • Sub participation

    A sub-participation transfers the economic risk and return of a loan to a participant while the grantor remains lender of record to the borrower.

  • Supplier credit

    Supplier credit is deferred payment terms from an exporter to a foreign buyer, often insured or refinanced with ECA support.

  • Syndication

    Syndication is the process of arranging a loan among multiple lenders so commitment size, risk and funding are shared under one facility.

T

  • Tied vs untied financing

    Tied vs untied financing contrasts official support that requires donor-country procurement with finance freely available for wider procurement.

  • Transfer risk

    Transfer risk is the risk that capital or exchange controls prevent conversion of local currency or remittance of funds to foreign creditors.

U

  • UCP 600

    UCP 600 is the ICC Uniform Customs and Practice for Documentary Credits that govern letter of credit transactions when expressly incorporated.

  • UK Export Finance (UKEF)

    UK Export Finance (UKEF) is the UK's export credit agency, providing insurance, guarantees and loans so viable UK exports are not lost for lack of finance.

  • Ultimate beneficial owner (UBO)

    An ultimate beneficial owner is the natural person who ultimately owns or controls a legal entity, or on whose behalf a transaction is conducted.

  • Untied loan guarantee

    An untied loan guarantee is official ECA cover for a foreign loan that is not conditioned on procurement from the supporting country.

  • URDG 758

    URDG 758 is the ICC Uniform Rules for Demand Guarantees governing independent demand guarantees and counter-guarantees when incorporated.