The Role of Trade Finance in Working CapitalAll Risks Insurance Insurance of the physical
damage to a project.
Asset Financing A type of financing whereby a
lender is given a charge over a specific asset
or group of assets that are being financed
by the underlying loan. The typical assets
charged are those used to generate working
cash as well as property and fixed assets.
Assignment Transfer of rights over project
contracts as security for lenders.
At Sight A negotiable instrument that
requires payment upon presentation of the
instrument.
Aval A guarantee on a negotiable instrument
which states that the party providing its aval
will pay the instrument upon its maturity if the
drawee or obligor fails to fulfil their obligation.
Avalisation The act of making an aval on
a negotiable instrument. When overseas
companies are the obligors on negotiable
instruments, the provision of an aval by
a bank is often necessary to make the
instrument acceptable for discounting.
Back-to-Back Lease An agreement under which
an intermediate lessor adopts responsibility
for an existing lease and ensures that the
final lessee agrees to the lease’s criteria.
Back-to-Back Letter of Credit A letter of credit
backed by another letter of credit with the
same terms and conditions.
Bank Bills Generic term for a discountable
commercial bill issued or accepted by a bank.
See banker’s acceptance and trade bill.
Bank Draft A draft drawn by a bank on itself.
The draft is purchased by the payer and sent
to the payee, who presents it to his bank
for payment. That bank presents it to the
payer’s bank for reimbursement. Also known
as bank cheque, cashier’s cheque, teller’s
cheque and treasurer’s cheque.
Bank Guarantee A guarantee issued by a
bank. See guarantee.
Bank Payment Obligation ((BPO) A bank
guarantee of payment made by the buyer’s
bank for a specific amount to a specific bank
on a specific date.
Banker’s Acceptance (BA) A negotiable time
draft drawn and accepted by a bank to pay
the face amount to the holder at a specified
time in the future. See draft.
Bargain Purchase Option An option included in
the lease contract that allows the lessee the
possibility to buy the leased equipment on
a specified option date at a predetermined
price that is considerably lower than the
expected fair market value.
Bargain Renewal Option A provision in the
lease contract offering the lessee the
opportunity to renew the contract on a given
option date and at a rental rate below the
expected fair market rate.
Barter The exchange of commodities, property
or services that are deemed to be of equal
value, without money changing hands.
Bid Bond Bond that acts as a guarantee that
the bidder will, at the bid price, enter into
and comply with a contract. Also known as
tender bond.
Bill of Exchange Payment order written by
one person (the drawer) directing another
person (the drawee) to pay a certain
amount of money at a specified future date.
It designates a named beneficiary but is
transferable by endorsement. Widely used
to finance trade and, when discounted with a
financial institution, to obtain credit. See draft.
Bill of Lading A document issued by a carrier
which is evidence of receipt of goods,
and is a contract of carriage. If issued in
negotiable form (i.e. ‘to order’), it becomes
documentary evidence of title to the goods.
Blank Endorsement A signature (e.g. on the
back of a cheque) endorsing the execution
of a transaction by the party in possession.
BLT (Build-Lease-Transfer) Similar to a BOT
or BRT project, except that a lease of the
project site, buildings and equipment is
granted to the private sector during the term
of the project.
Bonded Goods Imported goods that are held
in a dedicated storage area at port of entry,
called a bonded warehouse, whilst awaiting
payment of duties. Generally, the person
responsible for storing the goods has to put
down a bond that guarantees customs the
payment of any due duties when and if the
goods are collected for commercialisation
within that country’s domestic market.
Bonded Warehouse A secure warehouse
licensed by customs to store goods on which
duty has not yet been paid.
BOO (Build-Own-Operate) A method
of financing projects and developing
infrastructure, in which a private company