Acceptance Credit

Acceptance Credit

When all requirements of the document of financing are successfully met, the Acceptance Credit is a sort of letter of credit that is reimbursed by a time order authorising delivery within or following a particular date.  

What is Acceptance Credit? 

An acceptance credit constitutes a written credit which calls for the certificate of exchange’s duration to be specified. The financial institution often accepts the money, and after that it is reduced or withdrawn. In this instance, the recipient is quickly compensated at that specific percentage. This only applies to businesses and organisations that manage an account of finance with the goal to expand. 

Credit that is still not verified as accepted suggests that the vendor will go bankrupt and the payment cannot be paid. There are several reasons why this could happen. For instance, an item not being conveyed or other problems. The credit which is officially verified as being accepted means that the financial institution that granted it essentially guarantees payment for as long as the authorisation letter’s terms are followed. 

Understanding Acceptance of Credit 

An acceptance credit constitutes a sort of note of financing, provided the conditions of the document of advance have been fulfilled. It is paid through an administrative order authorising payments within or following a particular date. Whenever the debtor draws checks on the financial institution, the financial institution “accepts” them, gives them a price reduction, and promises to reimburse the debtor back once they develop. 

The essence of an acceptance represents the importer’s commitment to reimburse the vendor for the items they obtained by an upcoming date. Once the shipping firm receives the documentation provided by the bank, a guarantee for reimbursement has been made. 

The word refers to a form of credit given by a supplier to an advertiser in exchange for products delivered at another time. The importing business provides a guarantee that it will pay once it approves the documentation submitted by the bank.

Types of Acceptance Credit 

Acceptance Credit comes in two forms, that is confirmed and unconfirmed. In a confirmed note of credit, regardless of whether the financial institution that issued it eventually defaults on its commitments, the guidance bank promises to compensate the company that exported the products. Conversely, an unsubstantiated letter provides no specific assurance from the advising bank. 

Benefits of Acceptance Credit 

The benefit of an Acceptance Credit is the fact that the consumer just needs to pay according to the bill’s payment due date rather than right away. In case somebody needs money, the vendor discounts the invoice with his financial institution after having it approved by the financial institution. As a result, the vendor can also receive quick money. 

Additionally, the lender’s approval makes it easier for the two unidentified individuals to conduct business. Additionally, it promotes confidence between commercial entities. Both the seller of goods and the buyer of the product are guaranteed of receiving their payments on schedule. 

Example of Acceptance Credit 

With an acknowledged acceptance credit, the financial institution that provided the financing essentially guarantees payment for so long as the contract of credit conditions are adhered to. 

Frequently Asked Questions

The seller of goods may utilise an instrument of credit upon an acceptance credit that has been established. The bill may be reduced on the stock market or permitted to reach maturity after being approved by the financial institution. The seller of goods gives the financial institution a fee referred to as an acceptance commission in exchange for this assistance. 

International trading standards provide that it is an implied promise for a buyer to shell out the sum required for acquiring products at a particular point in the future. The presentation of documentation for approval in global trade. The person who imports or purchases the products agrees to reimburse the draft and signs it with the phrase “accepted” or other words signifying approval. 

It is frequently described as a subset of the documentation archives for global trade. The exporter’s lender is responsible for obtaining the money from the bank of the recipient during the gathering of documents. Once the purchaser has the paperwork attesting to the transported items, the deposit is made. 

Trade credit comes in a total of three main forms: 

  • Open Account – Smaller companies frequently provide trade financing without entering into a written contract using their clients. An arrangement like this is known simply as an open account. 
  • Acceptance of trade – It is referred to as a trade acceptance whenever both the purchaser and the seller establish a legal contract for providing and getting trade credit prior to the transaction. The buyer has to execute the contract before the supplier ships the products or renders their assistance. 
  • Note of Promissory – It is a type of financial contract where the purchaser guarantees that he will pay the seller a specific sum prior to the payment deadline. Before the deal closes, there is a legal agreement between both sides as well. 

Acceptance Credit means certain prerequisites and terms are fulfilled, and crediting is a means for purchasers to authorise payments to vendors at a certain date. A note of credit, which represents a reliable financial institution’s assurance ensuring the necessary payment is generated, is then used for that purpose. 

The financial institution’s LC ensures that the vendor will be paid regardless of whether specific requirements are followed. A note of financing guarantees that the seller is still reimbursed by the financial institution of the purchaser for the supplied items, lowering the risk of manufacturing, for instance in the case that an overseas client alters or rejects the purchase. 

The ratio of completed payments to attempted transactions is known as the cost acceptance percentage, also known as the authorisation rate or rejection rate. It is frequently shown in percentages. 

Payment acceptance can be expressed as the following equation: 

Payment acceptance = (no. of successful payments/no. of payment attempts) x 100 

Related Terms

    Read the Latest Market Journal

    Back in Business: The Return of IPOs & Top Traded Counters in March 2024

    Published on Apr 17, 2024 410 

    Start trading on POEMS! Open a free account here! At a glance: Major indices continue...

    Weekly Updates 15/4/24 – 19/4/24

    Published on Apr 15, 2024 68 

    This weekly update is designed to help you stay informed and relate economic and company...

    From $50 to $100: Unveiling the Impact of Inflation

    Published on Apr 12, 2024 151 

    In recent years, inflation has become a hot topic, evoking strong emotions as the cost...

    Japan’s Economic Resurgence: Unveiling the Tailwinds Behind Nikkei 225’s Record Leap

    Published on Apr 11, 2024 85 

    Source: eSignal, Intercontinental Exchange, Inc. In the heart of Japan’s economic landscape, the Nikkei 225...

    Weekly Updates 8/4/24 – 12/4/24

    Published on Apr 8, 2024 109 

      This weekly update is designed to help you stay informed and relate economic and...

    What Makes Forex Trading Attractive?

    Published on Apr 2, 2024 191 

    In a world where the click of a button can send goods across oceans and...

    Weekly Updates 1/4/24 – 5/4/24

    Published on Apr 1, 2024 98 

    This weekly update is designed to help you stay informed and relate economic and company...

    How to soar higher with Positive Carry!

    Published on Mar 28, 2024 137 

    As US Fed interest rates are predicted to rise 6 times this year, it’s best...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066