Acceptance Credit
Definition
A bank-backed financing tool in international trade where a bank guarantees payment to an exporter by accepting a bill of exchange on behalf of a trusted importer.
Example
Example 1:
A Nigerian cocoa exporter shipping goods to a German buyer gets his bill of exchange accepted by GTBank, the bank guarantees payment, and the exporter can immediately sell that bill on the money market for cash rather than waiting for the German buyer to pay.
Example 2:
A UK machinery exporter selling equipment to a Brazilian company arranges an acceptance credit through Barclays, Barclays accepts the bill of exchange, guaranteeing payment, while the exporter pays Barclays an acceptance commission for providing this service.