Financial Terms
A simple guide to common financing terms used in SME loans and trade facilities.
Why These Terms Matter
Understanding financial terms helps you make better decisions when applying for loans or managing your business financing. Here are some commonly used terms explained in a simple and practical way.
OVERDRAFT (OD)
A credit facility that allows a current account holder to withdraw more than their available balance, up to a pre-approved limit.
TRADE FINANCING
- Financing solutions provided to SMEs involved in local and international trade, supporting import and export activities.
LETTER OF CREDIT (LC)
Usage:
Used for import or local purchase of goods and equipment.
Features:
Bank guarantees payment to seller
Payment upon document submission
Fixed time and terms
Benefits:
Assures payment to supplier
Better pricing and payment terms
Reduced risk in transactions
TRUST RECEIPTS
Usage:
Allows businesses to receive goods before making payment.
Features:
Payment deferred after receiving goods
Linked to Letter of Credit
Benefits:
Improves cash flow
Immediate access to goods
Flexible repayment timing
BANKER’S ACCEPTANCE (BA)
Usage:
Used for financing trade transactions (import/export/local).
Features:
Bill of exchange accepted by bank
Payable at a future date
Benefits:
Immediate funding
Better cash flow management
FOREIGN EXCHANGE CONTRACTS (FEC)
Usage:
For businesses dealing with foreign currencies.
Features:
Buy/sell currency (spot or future)
Minimum RM50,000
Benefits:
Manage currency risk
Improve cash flow
Flexible financing for trade
BILLS OF EXCHANGE PURCHASED (BEP)
Usage:
Working capital financing for exporters.
Features:
Bank purchases export bills
Immediate credit to account
Benefits:
Faster access to funds
Improved cash flow
Not Sure Which Financing Is Right for You?
Our experts can help you understand these terms and choose the best financing solution for your business.