Terminologies: Financial and Trading
Note: The mentioned financial and trading terms are collected from the internet, thanks to the sources and Google. For Russian version can be translated using Google Translation or other
Aggregate Shipment: Multiple shipments combined into a single larger shipment.
Air Freight: The transport of goods by air.
Air Waybill: Similar to a bill of lading, but used for air freight shipments.
Amortization period: The number of periods (months or years) the principal repayments of a loan take to be completed.
Bill of Lading: A document issued by the carrier acknowledging receipt of goods for shipment.
BG – Bank Guarantee
Bulk Cargo: Goods transported in large quantities without individual packaging, such as grains or liquids.
Business Plan – with Summary of Economic and Financial Criteria For 10 Years.
Cap rate: NOI divided by the value of the property, expressed as a percentage.
Carrier: The company responsible for transporting the goods.
CIF (Cost, Insurance, and Freight): Seller is responsible for costs, insurance, and freight to the named destination.
CIP (Carriage and Insurance Paid To): Seller is responsible for costs and insurance to the named destination, but the risk of loss or damage transfers to the buyer upon delivery to the carrier.
CIS – Company Information Sheet. What information is needed to register for the CIS? Legal business name, Unique Taxpayer Reference (UTR) for the business, VAT registration number (if VAT registered), Name and Contact details of Director / CEO, Anti-Money Laundering Questionnaire form filled.
Collateral funding – securing a loan or credit by offering assets or property as security. Collateral is a tangible or intangible asset pledged to secure a loan. If the borrower stops repaying the loan, the lender can seize and sell the collateral to get their funds back.
Construction GBA: The gross building area, based on construction plans.
CPT (Carriage Paid To): Seller is responsible for costs and freight to the named destination, but the risk of loss or damage transfers to the buyer upon delivery to the carrier.
Customs: The process of clearing goods through a country’s border, including paying duties and taxes.
DAP (Delivered at Place): Seller delivers goods to the named place, but the buyer is responsible for unloading.
DDP (Delivered Duty Paid): Seller is responsible for delivering goods to the buyer’s premises, including all costs and duties.
Debt-financing – borrowing funds for a project (taking on debt) to be repaid with interest. Debt financing is a form of business finance that involves a company borrowing money from a financer, like a bank or working capital funding organization. The borrowing company is then liable to repay the money they borrowed, plus interest or a set fee, over a set period.
Deductions: A portion of the gross site area that cannot be built on, such as public access areas, roads, lanes, etc.
Delivery Terms: Agreements between parties regarding the location, timing, and costs of delivery.
DPU (Delivered at Place Unloaded): Seller delivers goods to the named place and handles unloading, but the buyer is responsible for any import duties or taxes.
Due Diligence is a process of verification, investigation, or audit of a potential deal or investment opportunity to confirm all relevant facts and financial information and to verify anything else that was brought up during an M&A deal or investment process. Due diligence is completed before a deal closes to provide the buyer with an assurance of what they’re getting.
EBITDA – High Annual EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
Environmental and Ecological Impact.
EXW (Ex Works): Seller’s responsibility ends when goods are available at their premises.
FCA (Free Carrier): Seller delivers goods to a named place and the buyer is responsible for the rest.
Floor space ratio (FSR): Used to determine the size of a building and control the density of development on a parcel of land.
FOB (Free on Board): Seller’s responsibility ends when goods are on board the vessel at the port of shipment.
Freight Forwarder: A company that arranges and manages the shipment of goods, including booking transportation and handling paperwork.
Full Container Load (FCL): A shipping method where a container is filled with goods from one shipper.
General partner (GP): An owner of a partnership with unlimited liability – usually a manager who actively participates in the operations.
Gross building area (GBA): The sum of all building spaces from wall to wall.
Gross leasable area (GLA): The sum of all enclosed livable space.
Gross site area: The two-dimensional measures of a site, based on its property lines.
Here’s a breakdown of key shipping terms:
INCOTERMS (International Commercial Terms): A set of 11 rules issued by the International Chamber of Commerce (ICC) that define the responsibilities of sellers and buyers in international transactions. The purpose is to clarify who is responsible for tasks, costs, and risks during the shipping process.
IRR – High Annual IRR (Internal Rate of Return) on Investments.
Joint venture – Where the investor funds for partnership in the project, with forming a joint venture , a legal entity for joint management of the company.
Joint Venture (Function-Based) – The parties form an agreement to mutually benefit from the arrangement, to gain from each other’s expertise in different areas. This enables them to work efficiently and effectively. Before entering an agreement, the would-be partner companies ascertain whether they will be able to function and perform efficiently together or not.
Joint Venture (Project-Based). Partners come together to accomplish a fixed task. Since these collaborations are usually done for an exclusive purpose, they stand canceled once the project is accomplished. These joint ventures exist for a particular task, project, or period.
Land loan: Financing used to acquire a piece of land with no NOI. The long-term value will be much lower than that of an income-producing property.
Limited partner (LP): A passive investor who has limited ability, based on the amount they have invested in the project.
Loan To Cost (LTC): The amount of debt financing a lender will provide as a percentage of the cost of a development.
Loan To Value (LTV): The amount of debt financing a lender will provide as a percentage of the market value of the real estate.
LOI – A “LOI” stands for a Letter of Intent, a non-binding document outlining the preliminary terms and conditions of a potential business transaction, serving as a formal expression of interest before a final agreement is reached. LOIs are used to initiate a business transaction and help define expectations between parties before a legally binding agreement is created.
Max GBA: The gross building area, is calculated based on the FSR.
MCA – A merchant cash advance (MCA) is a business loan that provides cash upfront in exchange for a percentage of future credit card sales. MCAs are a type of working capital financing that can help small businesses with cash flow.
How MCAs work.
- A lender assesses your sales, usually the average value of card sales
- The lender offers a lump sum of cash
- You accept the advance
- You repay the lender a percentage of card sales, plus a small fee
MCA advantages: Quick approval: MCAs can be approved faster than traditional loans. Repayment flexibility: You repay based on a percentage of sales, so if your business grows, you repay faster.
No collateral required: Unlike traditional loans, MCAs are unsecured, so you don’t need to pledge assets as collateral.
MCA considerations – Before getting an MCA, you should consider the costs and benefits, and explore other financing options. A merchant cash advance (MCA) is an unsecured lump sum of money repaid over time through a percentage of future cash flow. MCAs are essentially payday loans used by businesses that conduct most sales through credit cards and debit cards.
Disadvantages of MCA- include a greater risk of fraud, increased chargebacks, higher fees, and delays in the approval process. Not surprisingly, specialized payment processing for franchises and other businesses in the form of high-volume merchant accounts can have its disadvantages.
MOA – Memorandum of Association is a legal document that explains why the organization was founded. It establishes the company’s authority and the terms under which it works. It is a manual that includes all of a company’s laws and regulations for its interactions with the outside world.
MOU – Memorandum of Understanding
MT 760 – The SWIFT MT 760 message format is used to request or issue a letter of credit or documentary credit. It’s a digital message between banks. The MT 760 message is a written guarantee that honors commitments to a third party in certain circumstances.
Structure of MT 760
- The message is divided into three sections: A, B, and C
- Sequence A contains general information
- Sequence B contains guarantee undertaking details
- Sequence C is optional and contains local undertaking details
Contents of MT 760
- Narrative: Explains the context of the transaction
- Sender: The sender’s information
- Message Type: The message type is 760
- Receiver: The receiver’s information
- Sequence number: The sequence number
Other details
- The MT 760 message may include undertaking details such as the undertaking number, date of issue, form of undertaking, applicable rules, expiry type, date of expiry, and expiry condition.
- The MT 760 message may also include information about the applicant, obligor, instructing party, issuer, beneficiary, advising bank, and second advising bank.
MT 103 – A SWIFT MT103 is a document that confirms an international money transfer. It’s a standardized message that includes all the details of the transaction, such as the amount, date, sender, and recipient. It is the unique reference number to identify the transaction. This includes the payer’s details including their name, address, and more if required. This field indicates who will cover the costs of the SWIFT transfer: BEN: The beneficiary covers all fees. OUR: The sender covers all fees.
How MT103 is used:
- Banks can provide an MT103 document after an international transfer.
- It’s globally accepted as proof of payment.
- It can be used to track a payment.
- It can be requested to review transfer details if funds aren’t received after a certain number of days.
How MT103 created
- It’s created using the SWIFT network, a secure messaging system that allows banks to work together to move money internationally.
- It contains structured fields to ensure all necessary information is included and formatted correctly.
What MT103 includes
- The sender’s name and bank
- The recipient’s name and bank
- The amount, currency, and fees
- The date of the transfer
- The processing institutions
MT 799 is a SWIFT message type used by banks to communicate between themselves about transactions. It’s a digital message that confirms funds or deposits and is used to initiate, confirm, and streamline financial transactions. The buyer’s bank may charge a fee for sending an MT799 message, depending on the bank and the transaction value. How MT799 works.
- The buyer’s bank sends an MT799 message to the seller’s bank
- The message confirms that the buyer is ready and able to pay
- The message helps reduce the risk of non-payment
- The message can also help reduce the risk of fraud
Benefits of MT799: Speed: MT799 helps speed up the process of initiating and confirming transactions. Security: The SWIFT network has security protocols to ensure that messages are transmitted and received securely. Standardization: The use of standardized message formats like MT799 helps reduce misunderstandings
Net Operating Income (NOI): Gross rental revenue less operating expenses (property taxes, insurance, maintenance, etc.).
Net site area: The gross site area, less any deductions.
NPV: Net Present Value (NPV) of The Company.
Saleable area: The gross building area based on construction, less all common spaces or other non-salable areas.
SBLC – Standby Letter of Credit (SBLC) – a loan given against a guarantee issued by a bank for payment to the investor by the borrower. A Standby Letter of Credit is a legal instrument issued by a bank on behalf of its client, providing a guarantee of its commitment to pay the seller if its client (the buyer) defaults on the agreement. For the buyer, an SBLC ensures that they will receive the goods or services they have purchased, even if the seller fails to fulfill their obligations. For the seller, an SBLC assures that they will be paid for their goods or services, even if the buyer fails to pay. Banks typically charge an issuing fee for SBLCs, which is usually a percentage of the face value of the SBLC, typically 0.25% to 1%. However, some banks may charge a flat fee. The issuing fee covers the bank’s costs for assessing the risk of the transaction and issuing the SBLC. The bank will issue the Standby Letter of Credit (SBLC) within 48 hours of release. Once issued, a copy of the SBLC will be emailed to the fund provider or Seller as it is transmitted by an MT760 SWIFT message to the beneficiary, including the reference number of the SBLC. When setting up an SBLC, the buyer’s bank performs an underwriting duty to verify the credit quality of the buyer. Once the buyer’s bank is satisfied that the buyer is in good credit standing, the bank sends a notification to the seller’s bank, assuring its commitment of payment to the seller if the buyer defaults on the agreement. It provides proof of the buyer’s ability to make payment to the seller. The process of obtaining an SBLC is similar to a loan application process. The process starts when the buyer applies for an SBLC at a commercial bank. The bank will perform its due diligence on the buyer to assess its creditworthiness, based on past credit history and the most recent credit report. If the buyer’s creditworthiness is in question, the bank may require the buyer to provide an asset or the funds on deposit as collateral before approval. The level of collateral will depend on the risk involved, the strength of the business, and the amount secured by the SBLC. The buyer will also be required to furnish the bank with information about the seller, shipping documents required for payment, the beneficiary’s bank, and the period when the SBLC is valid. After review of the documentation, the commercial bank will provide an SBLC to the buyer. The bank will charge a service fee of 1% to 10% for each year when the financial instrument remains valid. If the buyer meets its obligations in the contract before the due date, the bank will terminate the SBLC without a further charge to the buyer. If the buyer fails to meet the terms of the contract due to various reasons, such as bankruptcy, cash flow crunch, dishonesty, etc., the seller is required to present all the required documentation listed in the SBLC to the buyer’s bank within a specified period, and the bank will make the payment due to the seller’s bank.
Types of Standby Letter of Credit:
1. Financial SBLC – The financial-based SBLC guarantees payment for goods or services, as stipulated in the agreement. For example, if a crude oil company ships oil to a foreign buyer with an expectation that the buyer will pay within 30 days from the date of shipment, and the payment is not made by the required date, the crude oil seller can collect the payment for goods delivered from the buyer’s bank. Since it is a credit, the bank will collect the principal plus interest from the buyer.
2. Performance SBLC – A performance-based SBLC guarantees the completion of a project within the scheduled timelines. If the bank’s client is unable to complete the project outlined in the contract, then the bank promises to reimburse the third party to the contract a specific sum of money. Performance SBLCs are used in projects that are scheduled for completion within a specific timeline, such as construction projects. The payment serves as a penalty for delays in the project’s completion, and it is used to compensate the customer for the inconvenience caused or to pay another contractor to take over the project.
Shipping Terms – like Incoterms (International Commercial Terms), define responsibilities and costs for international trade, clarifying who is responsible for transportation, insurance, and customs clearance.
Term: The length of time that the interest rate on a mortgage loan is agreed upon.