Glossary
Cash against documents (CAD)
Method of payment in which a third party intermediary transfers title documents to the buyer upon payment in cash
Cash in advance
A method of payment in which the buyer pays for the goods before receipt of goods or title documents.
Cash with order
Method of payment in which the buyer pays when ordering the goods or service.
CIRR
Commercial interest reference rate.
Clean draft
A draft with no documents attached.
Cofinancing
Joint financing of large projects in developing countries with loans or grants by more than on lender or development agency. Could include participation from commercial banks, World Bank, development organizations and ECAs.
Collateral
Assets pledged as security for a credit, the pledged assets usually being something readily convertible into cash, i.e. securities.
Collection
The presentation for payment of any obligation, B/E or other financial instrument.
Collection papers
Documents submitted to a buyer for the purpose of receiving payment for shipment.
Commercial invoice
Accounting document by which the seller claims payment from the buyer for the value of goods or services provided.
Commercial register
Register of companies containing their official names, information on signatories, addresses and so forth.
Commercial risk
The risk of non-payment by a non-sovereign or private sector borrower arising from default, insolvency, and/or failure to take up goods that have been shipped according to the supply contract.
Commercial risk coverage
Coverage provided by an ECA, Credit Insurance Institution or insurance companies for the commercial risks.
Commitment
A firm obligation by a bank to provide funds on a future date; the aggregate credit liability, which the bank has assumed in respect of an individual customer.
Commitment fee
A fee charged for the firm obligation to provide funds on future date.
Committed loan facility
A term used to denote that a bank has in a legally binding way committed to the Loan facility to be provided to a customer.
Completion guarantee
Guarantee provided by contractor through a performance bond or another security arrangement guaranteeing that the project or facility will be completed and operational on the stipulated date.
Completion risk
Risk that a project is not completed and constructed on time or delivered with technical deficiencies.
Concessional loan
Finance provided below market rates, usually backed by the public sector.
Confirmed documentary credit
A documentary credit arrangement in which a bank in the exporter's country adds its confirmation to DC i.e. its guarantee of payment. The position of the exporter is thus covered also in respect of default of the foreign bank.
Consensus
Refers usually to the OECD Consensus on Officially Supported Export Credits
Cost of funds
A term used to denote the lending party's funding costs. Usually referring to the best rate on which the bank can get money from the market.
Country risk
General level of political and economic uncertainty arising from social, economic and legal factors in a particular country, i.e. the risk of lending or under a guarantee from the government
Covenant
A contractual agreement by a borrower to perform certain action, usually to disclose information or to take care that certain financial ratios are sustained at the level specified. The breach of covenant constitutes usually an event of default.
Cover
Provision of export credit guarantee or insurance against commercial and/or political risk.
Credit risk insurance
Insurance designed to cover default by the Obligor
DC
See Documentary Credit
Default
The failure to repay a loan on schedule or to make timely payment of interest, or other incidence determined to be an event of default in the loan agreement. Once the borrower is in default the bank will usually initiate action to recover its money.
Deferred payment documentary credit
Type of documentary credit providing some time for the repayment after the presentation of documents.
Demand draft
Draft payable on demand.
Demand line of credit
A bank credit line that enables the customer to borrow on an on demand basis.
Disbursement
Drawing on a loan, paying out cash.
Discount
Deduction from a value of a commercial paper in consideration of receipt by the seller of the paper of cash before the maturity of the paper.
Discount rate
The interest at which bills are discounted. The price of the advance payment.
Dishonour
Refusal on the part of the drawee to accept a draft or pay it when due.
Documentary collection
A method of payment in which the bank acts only as a collection agent. The documents entitling to goods are released against cash payment or acceptance.
Documentary credit
A financial document issued by a bank at the request and responsibility of the applicant (buyer of merchandise) to a beneficiary (seller), authorizing him to draw drafts to a stipulated amount under specified terms and undertaking by the bank to conditionally or unconditionally to provide payments for drafts. The DC guarantees payment to the seller if and when certain conditions are fulfilled. Also known as Letter of Credit.
Documents against acceptance
A method of payment in which the documents entitling to title are released against acceptance of draft
Documents against payment
Method of payment in which the documents entitling to goods are released upon payment.
Down payment
Payment due from the buyer to supplier in cash before entry into a contract or performance under a contract. In most cases a down payment of 15 per cent of the contract value is a prerequisite for ECA coverage down payment also being ineligible for coverage.
Draft
Another word for B/E.
Drawee
The person to whom a B/E is addressed or who is expected to accept it and pay on maturity
Drawer
The person who issues a B/E and stands to receive payment under it.
Drawing
Used to denotate a disbursement from the Borrower's point of view.