Trade finance

How it is used

Used in corporate banking and international trade. It covers letters of credit, documentary collections, guarantees, export loans and supply chain finance. The key question is who carries the risk: cash in advance protects the exporter, open account favours the importer, and bank products sit in between.

Example sentences

1. Our trade finance team can structure a letter of credit for your first shipment to Brazil.

2. Trade finance income rose as exports picked up.

Common collocations

• trade finance products
• trade finance department
• supply chain finance
• export finance

Related terms

• letter of creditA bank's written promise to pay the seller in an international sale, provided that the seller presents the required documents, such as the bill of lading and invoice.
• documentary collectionA trade payment method in which the exporter's bank sends the shipping documents to the importer's bank, which releases them only when the importer pays or accepts a bill of exchange.
• letter of guaranteeA bank's written promise to pay a set amount to a third party if its customer fails to meet an obligation, such as finishing a contract or paying a supplier.
• bill of exchangeA written order from one party to another to pay a fixed amount to a named person, either on demand or on a set future date, used mainly in trade.
• foreign exchangeThe buying and selling of currencies, or foreign currency itself. It is often shortened to FX or forex.