Definition
Acceptance credit is a type of short-term financing used in international trade. It happens when a bank agrees to guarantee payment for a buyer by accepting a bill of exchange. This assurance helps the seller feel confident that they will receive payment on the agreed date.
Example
An Indian importer buys goods from a foreign supplier and agrees to pay after 90 days. The importer's bank accepts the bill of exchange and guarantees the payment. This means the seller knows the payment will be made on time, even if the buyer pays later.
Caution
Although acceptance credit helps build trust in trade, it still involves financial responsibility. The buyer must ensure they have enough funds to repay the bank when the payment becomes due.