The Role of Trade Finance in Working Capitalof payment or the buyer’s written promise to
pay on a specified future date.
Documentary Credit A written promise by
a bank to pay a beneficiary subject to
submission of the required documents.
Documentary Draft A bill of exchange
accompanied by shipping documents that
confer title to goods. This type of bill of
exchange is less risky, as the shipping
documents are sent to the remitting bank
rather than directly to the buyer/importer.
The latter needs to pay or accept the draft
for future payment before being able to
collect the documents and therefore the
goods. See clean draft.
Documents against Acceptance
(D/A) Instructions given by an exporter to
their bank that the documents attached to a
time draft for collection are only deliverable
to the drawee against the drawee’s
acceptance of the draft.
Documents against Payment Instructions
given by an exporter to their bank that the
documents attached to a sight draft for
collection are only deliverable to the drawee
against payment.
Draft A written order given by the issuing party
(the drawer) to another (the drawee) to pay
a party identified on the order (payee) or the
bearer a specified sum, either on demand
(sight draft) or on a specified date (time
draft). See bank draft, bill of exchange,
cheque and banker’s acceptance.
Drawee The party required to pay the amount
owed on a cheque/draft.
Drawer The party which issues the cheque/
draft and is subsequently paid by the
drawee.
Drawback A refund on duty paid on imports
that are later exported.
Drawee Bank The bank on which a cheque or
draft is drawn – the payer’s bank.
Effective Lease Rate The effective rental rate
paid by the lessee on a lease agreement,
taking account of the timing and differing
size of payments.
Electronic Bill Presentment and Payment
(EBPP) The methods and processes that
allow invoices (bills) to be created, sent,
received, processed and paid via the internet.
Electronic Invoice Presentment and Payment
(EIPP) The methods and processes that
allow invoices (bills) to be created, sent,
received, processed and paid via the internet.
Endorsee The individual or legal entity that
acquires ownership of a specific amount of
funds through the endorsement of a cheque,
bill of exchange or promissory note.
Endorsement A signature required for the
movement of funds by cheque, bill of
exchange or promissory note.
Endorser The individual/legal entity that signs
a document (i.e. cheque) and by doing so
relinquishes ownership to a specific amount
of funds.
Enterprise Resource Planning (ERP)
Company-wide software module that
automates and integrates all functions of a
business, including support functions such
as human resources, thereby allowing a
company to better identify, plan and manage
its resources.
Escrow (Escrow Account) Money, securities,
documents or real estate held by a
third party to be returned once specific
predetermined criteria are met. It also refers
to borrowers’ accounts established as
security for debt service or maintenance of
the project.
Estimated Residual Value The estimated value
a leased asset will have on the expiry of the
lease contract.
Estimated Useful Life The time period during
which a tangible fixed asset is assumed
to be useful for the company’s operations.
The estimated useful life of an asset can
be used to calculate the maximum period
of a tax lease or to specify the type of lease
(e.g. capital lease) or to determine the
depreciation method to be applied on the
leased asset.
Exchange Control The control/restriction on
the inflow and outflow of currency by a
sovereign state.
Export Buyer Credit A loan, made on behalf of
a supplier of goods in an export situation to
the overseas buyer, to allow the buyer to pay
for the goods.
Export Credit Agency A government-affiliated
institution that has, as its mission, to
promote the exports of that country by
providing export credit guarantees.
Export Credit Guarantee Similar to export
credit insurance, but is generally a