Definition of Trade credit

Trade credit

credit granted by a firm to another firm for the purchase of goods or services.

Export-Import Bank (Ex-Im Bank)

The U.S. federal government agency that extends trade credits to U.S.
companies to facilitate the financing of U.S. exports.

FCIA

Foreign credit Insurance Association. A private U.S. consortium of insurance companies that offers
trade credit insurance to U.S. exporters in conjunction with the U.S. Export-Import Bank.

Full Credit Period

The period of trade credit given by a supplier to its customer.

Balance of trade

Net flow of goods (exports minus imports) between countries.

Basket trades

Related: Program trades.

Best-interests-of-creditors test

The requirement that a claim holder voting against a plan of reorganization
must receive at least as much as he would have if the debtor were liquidated.

Block trade

A large trading order, defined on the New York Stock Exchange as an order that consists of
10,000 shares of a given stock or a total market value of $200,000 or more.

Comparative credit analysis

A method of analysis in which a firm is compared to others that have a desired
target debt rating in order to infer an appropriate financial ratio target.

Consumer credit

credit granted by a firm to consumers for the purchase of goods or services. Also called
retail credit.

Counter trade

The exchange of goods for other goods rather than for cash; barter.

Credit

Money loaned.

Credit analysis

The process of analyzing information on companies and bond issues in order to estimate the
ability of the issuer to live up to its future contractual obligations. Related: default risk

Credit enhancement

Purchase of the financial guarantee of a large insurance company to raise funds.

Credit period

The length of time for which the customer is granted credit.

Credit risk

The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
payment may not be made on a negotiable instrument. Related: Default risk

Credit scoring

A statistical technique wherein several financial characteristics are combined to form a single
score to represent a customer's creditworthiness.

Credit spread

Related:Quality spread

Crediting rate

The interest rate offered on an investment type insurance policy.

Creditor

Lender of money.

Demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis.

Eurocredits

Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and
government borrowers.

Evergreen credit

Revolving credit without maturity.

Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of
institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.

Five Cs of credit

Five characteristics that are used to form a judgement about a customer's creditworthiness:
character, capacity, capital, collateral, and conditions.

Flat trades

1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
accrued interest.
2) Any security that trades without accrued interest or at a price that includes accrued
interest is said to trade flat.

Floor trader

A member who generally trades only for his own account, for an account controlled by him or
who has such a trade made for him. Also referred to as a "local".

Foreign tax credit

Home country credit against domestic income tax for foreign taxes paid on foreign
derived earnings.

Forward trade

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon the trade date.

Full faith-and-credit obligations

The security pledges for larger municipal bond issuers, such as states and
large cities which have diverse funding sources.

Informationless trades

trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.

Information-motivated trades

trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.

Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).

Letter of credit (L/C)

A form of guarantee of payment issued by a bank used to guarantee the payment of
interest and repayment of principal on bond issues.

Line of credit

An informal arrangement between a bank and a customer establishing a maximum loan
balance that the bank will permit the borrower to maintain.

Line of credit

An informal arrangement between a bank and a customer establishing a maximum loan
balance that the bank will permit the borrower to maintain.

Posttrade benchmarks

Prices after the decision to trade.

Pre-trade benchmarks

Prices occurring before or at the decision to trade.

Program trades

Also called basket trades, orders requiring the execution of trades in a large number of
different stocks at as near the same time as possible. Related: block trade

Publicly traded assets

Assets that can be traded in a public market, such as the stock market.

Registered trader

A member of the exchange who executes frequent trades for his or her own account.

Retail credit

credit granted by a firm to consumers for the purchase of goods or services.
See: consumer credit.

Reversing trade

Entering the opposite side of a currently held futures position to close out the position.

Revolving credit agreement

A legal commitment wherein a bank promises to lend a customer up to a
specified maximum amount during a specified period.

Revolving line of credit

A bank line of credit on which the customer pays a commitment fee and can take
down and repay funds according to his needs. Normally the line involves a firm commitment from the bank
for a period of several years.

Spot trade

The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.

Terms of trade

The weighted average of a nation's export prices relative to its import prices.

Thinly traded

Infrequently traded.

Trade

A verbal (or electronic) transaction involving one party buying a security from another party. Once a
trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.

Trade acceptance

Written demand that has been accepted by an industrial company to pay a given sum at a future date.
Related: banker's acceptance.

Trade date

In an interest rate swap, the date that the counterparties commit to the swap. Also, the date on
which a trade occurs. trades generally settle (are paid for) 1-5 business days after a trade date. With stocks,
settlement is generally 3 business days after the trade.

Trade debt

Accounts payable.

Trade draft

A draft addressed to a commercial enterprise. See:draft.

Trade on top of

trade at a narrow or no spread in basis points relative to some other bond yield, usually
Treasury bonds.

Trade house

A firm which deals in actual commodities.

Traders

Persons who take positions in securities and their derivatives with the objective of making profits.
traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread.
traders can also be of the sort who take proprietary positions whereby they seek to profit from the directional
movement of prices or spread positions.

Uptick trade

Related:Tick-test rules

Credit

Buying or selling goods or services now with the intention of payment following at some time in
the future (as opposed to buying or selling goods or services for cash).

Creditors

Purchases of goods or services from suppliers on credit to whom the debt is not yet paid. Or a
term used in the Balance Sheet to denote current liabilities.

Credit

One side of a journal entry, usually depicted as the right side.

North American Free Trade Agreement (NAFTA)

an agreement among Canada, Mexico, and the United States establishing the North American Free trade Zone, with a resulting reduction in trade barriers

World Trade Organization (WTO)

the arbiter of global trade that was created in 1995 under the General Agreement on Tariffs and trade; each signatory country has one
vote in trade disputes

credit analysis

Procedure to determine the likelihood a customer will pay its bills.

credit policy

Standards set to determine the amount and nature of credit to extend to customers.

line of credit

Agreement by a bank that a company may borrow at any time up to an established limit.

trade-off theory

Debt levels are chosen to balance interest tax shields against the costs of financial distress.

Balance of Merchandise Trade

The difference between exports and imports of goods.

Balance of Trade

See balance of merchandise trade.

Credit Crunch

A decline in the ability or willingness of banks to lend.

Credit Rationing

Restriction of loans by lenders so that not all borrowers willing to pay the current interest rate are able to obtain loans.

Free Trade

The absence of any government restrictions, such as tariffs or quotas, on imports or exports.

Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.

Terms of Trade

The quantity of imports that can be obtained for a unit of exports, measured by the ratio of an export price index to an import price index.

Trade Deficit

Deficit on the balance of merchandise trade.

Consumer Credit Protection Act

A federal Act specifying the proportion of
total pay that may be garnished.

Trade Loading

A term used for channel stuffing in the domestic tobacco industry.

Creditor Proof Protection

The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules.
The provincial insurance acts protect life insurance products which have a family class beneficiary. Family class beneficiaries include the spouse, parent, child or grandchild of the life insured, except in Quebec, where creditor protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same security should the holder go bankrupt. There are also circumstances under which the creditor proof protections do not hold for life insurance products. Federal bankruptcy law disallows the protection for any transfers made within one year of bankruptcy. In addition, should it be found that a person shifted money to an insurance company fund in bad faith for the specific purpose of avoiding creditors, these funds will not be creditor proof.

Credit

A rating of a company's credit (ability to payback debt), usually by a third party credit agency.

Credit Loss

A loan receivable that has proven uncollectible and is written off.

Credit Risk

Financial and moral risk that an obligation will not be paid and a loss will result.

Credit Terms

Conditions under which credit is extended by a lender to a borrower.

Credit Union

credit unions are community based financial co-operatives and most offer a full range of services. All are owned and controlled by members who are also shareholders. credit unions are regulated provincially and insured by a stabilization fund, deposit insurance or guarantee corporation.
credit unions are supported by a system of provincial credit union Centrals, a national credit union Central and affiliated national financial co-operatives.

Creditor

Person or business that is owed money.

Export Credit Insurance

The granting of insurance to cover the commercial and political risks of selling in foreign markets.

Formalized Line of Credit

A contractual commitment to make loans to a particular borrower up to a specified maximum during a specified period, usually one year.

Letters of Credit

A letter of credit is a guarantee of payment by a bank (issuing institution)to a third party for a specific amount of money, if certain conditions are met.

Line of Credit

An agreement negotiated between a borrower and a lender which establishes the maximum amount against which a borrower may draw. The agreement also sets out other conditions, such as how and when money borrowed against the line of credit is to be repaid.

Operating Line of Credit

A bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year.

Revolving Credit

Line of credit against which funds may be borrowed at any time, with regular scheduled repayments of a predetermined minimum amount.

Supplier Credit

Period of delay allowed by a firm's supplier to pay its invoices. Frequently, the terms are : 2% discount on invoice if paid in 10 days or net if paid in 30 days.

credit

On your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit.
However, ‘credit’ also means money that you borrow from a financial lender, like a bank. A credit card, for example, is a card that allows you to access funds which you then have to repay.

credit bureau

An organization that provides financial institutions with credit information concerning existing or potential customers who are looking to obtain credit services.

credit card

A revolving source of credit with a pre-established limit. You have to pay interest on a credit card if you have an outstanding balance.

credit memo

A record of the funds which have been credited to your account.

line of credit

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a line of credit permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.

personal line of credit (PLC)

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a PLC permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.

secured loan or line of credit

A lump sum of funds (loan), or a revolving source of credit with a pre-established limit (line of credit), for which the customer must provide collateral.

Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.

Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.

Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.

Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.