78 terms in International Trade Finance

During my LLM in London, one of the modules I looked forward to was Trade Finance.

But my biggest challenge was the terminologies used to describe various types of transactions.

So we are dedicating this cheat sheet to 78 of such terms used in International Trade Finance

to help

Students
Young bankers
International traders

master key definitions in a simple-to-recall way.

If this is you, then grab an HD PDF copy of this sheet for ease of use.

We have definitions like:

BONDS AND GUARANTEES

1. Advance Payment Bond: Guarantees refund of an advance payment if the seller fails to fulfill their obligations.

2. Bank Guarantee: A bank's promise to cover losses if a borrower defaults.

3. Blanket Bond: Covers a group of individuals, articles, or properties under a single policy.

4. Construction Bond: Guarantees the contractor's performance in construction projects.

Etc

LETTERS OF CREDIT AND RELATED INSTRUMENTS

1. Acceptance Credit: A letter of credit requiring the seller to draw a time draft against the buyer for future payment.

2. Advising Bank: Notifies the beneficiary about the letter of credit.

3. Assignment of Proceeds: Allows the beneficiary to assign money owed under the LC to another party.

4. Back-to-Back LC: Two letters of credit used together for a transaction involving an intermediary.

ETC

TRADE FINANCE MECHANISMS

1. Arbitrage: Profit from price differences in different markets.

2. Bilateral Trade Agreement: Agreement between two countries that provides for reciprocal economic advantages.

3. Buyer's Credit: A short-term loan to finance the purchase of goods.

4. Cash Against Documents (CAD): Payment when title documents are transferred to the buyer.

5. Cash in Advance (CIA): Buyer pays before shipment of goods.

ETC