Finance instruments glossary index

This finance instruments glossary index curates glossary entries for credit, cover and documentary instruments across export finance, project finance and commercial real estate desks. Each line links to the glossary definition.

Export credit and official cover

• Buyer Credit: Buyer credit is bank or official financing to an overseas buyer so the exporter is paid while the buyer repays over time.
• Supplier Credit: Supplier credit is deferred payment terms from an exporter to a foreign buyer, often insured or refinanced with ECA support.
• 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.
• 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.
• Comprehensive Cover: Comprehensive cover is ECA insurance or guarantee protection against both commercial and political risks of non-payment on an export credit.
• Political Risk Insurance: Political risk insurance covers investors and lenders against defined non-commercial risks such as expropriation and transfer restriction.
• MIGA Cover: MIGA cover is Multilateral Investment Guarantee Agency political risk insurance and credit enhancement for investment into developing members.
• Hermes Cover: Hermes cover is the common name for German federal export credit guarantees that protect exporters and banks against commercial and political defaults.
• 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.

Documentary credits and collections

• Letter of Credit: A letter of credit is an irrevocable bank undertaking to honour a complying presentation of documents under agreed credit terms.
• Confirmed Letter of Credit: A confirmed letter of credit adds a second bank's irrevocable undertaking to honour or negotiate a complying presentation.
• Standby Letter of Credit: A standby letter of credit is an irrevocable, independent bank undertaking payable against documents if the applicant defaults.
• Documentary Collection: A documentary collection is bank handling of financial and commercial documents to obtain payment or acceptance under URC 522.
• 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.
• Forfaiting: Forfaiting is without-recourse discounting of an exporter's future trade receivables evidenced by transferable payment instruments.
• Factoring: Factoring is a receivables finance contract in which a supplier assigns trade debts to a factor that finances, ledgers, collects or covers default.

Demand guarantees and contract bonds

• Demand Guarantee: A demand guarantee is an independent undertaking to pay on a complying demand, commonly governed by ICC URDG 758.
• Performance Bond: A performance bond is contract security that supports proper performance, often issued as a bank demand guarantee under URDG 758.
• 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.
• Advance Payment Guarantee: An advance payment guarantee secures repayment of a contract mobilisation advance, usually as a reducing demand guarantee.
• Retention Bond: A retention bond is a guarantee that replaces cash retention, securing defect liability after taking over of the works.

Risk transfer and facility forms

• 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.
• 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.
• Borrowing Base: A borrowing base is the collateral-derived ceiling on revolving advances, calculated from eligible assets after advance rates and reserves.
• Construction Loan: A construction loan is credit extended to erect or rehabilitate buildings or other structures, including infrastructure needed for development.
• Syndication: Syndication is the process of arranging a loan among multiple lenders so commitment size, risk and funding are shared under one facility.