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 Security

The NZECO may seek a security to ensure that, in the event of a buyer’s default, it will be repaid or appropriately compensated.  Forms of security include: a bank guarantee; a guarantee from a parent company; a guarantee from the Government of the buyer’s country; or mortgage on the goods to be financed (e.g. on aircraft). 

 Security debt

A debt obligation backed by the pledge of assets or other forms of security.

 Shipping documents

These documents relate to the circumstances of conveyance and delivery of goods, and their possession normally represents title to those goods. The stage at which these documents are handed over to the buyer is important, not least in terms of whether payment is made at this stage or whether the documents are to be exchanged for some form of promise to pay (e.g. a bill of exchange or promissory note).

 Short term credit

Credit that has a maturity of less than 360 days.  The NZECO does not cover short term credit.

 Sight / Term credit

A letter of credit may be issued with a variety of "tenors" which determine the timing of payment. A "sight credit” is payable upon receipt at the counters of the appropriate party (allowing reasonable time for verification of documents), whereas a "term credit” involves payment at some pre-agreed future date e.g. 60 days after sight; or 30 days after the shipment date.

 Sovereign guarantee

An irrevocable guarantee by a Government that commits itself to full payment of an export transaction.  This will be required by the NZECO in cases involving a public sector buyer which does not have significant independent sources of revenue outside the central government budget and which does not have independently audited financial statements. 

 Starting point of credit

For most export transactions the credit period starts at the time of delivery of goods (although there may be exceptions for some industries).  In connection with sales of capital equipment for turnkey installations the credit period can begin from the day of final delivery.  If the exporter has responsibility for assembling and commissioning the equipment according to the agreement, the credit period can begin on the day it is ready for commissioning.

 Supplier credit

Credit granted by an exporter to its international buyer as part of its supply agreement. The NZECO can provide the exporter with supplier credit insurance covering the risk of default on repayment of a medium-term credit.

 Surety bond

A surety bond guarantees the performance or financial obligations of others, and they are issued by a licensed surety company.  In the construction industry, for example, surety bonds are provided to the construction project owner (the obligee) by the surety company to assure that the contracted work will be completed by the contractor (the principal), and that protection will be provided if it is not.  Surety bonds used in construction include bid, performance, and payment bonds as well as supply and maintenance bonds.  The NZECO may cover any surety bond that falls within the criteria for the US Surety Bond Guarantee product.

 Surety company

A company that is licensed to write a surety bond.  A surety company's primary duty is not to lend the contractor money. Instead, it uses its financial resources to guarantee a contractor's commitment and ability to complete a contract.  As part of its pre-assessment, the surety company takes an in-depth look at a contractor's entire business operations (experience, management capability, equipment, work in progress), financial strength and credit history in order to be satisfied that the contractor is capable of completing the project before issuing a bond.  When the surety company does issue a bond, and should the contractor experience difficulties on a project or is in a default situation, the surety company may take several actions. These depend on the options contained in the particular bond form and may include: providing finance to the original contractor; or providing support to ensure project completion; or arranging for a new contractor to complete the project; or paying the cost of completion up to the penal sum of the bond.

 Syndicated loan

A very large loan in which a group of banks work together to provide funds for one borrower. There is usually one lead bank that takes a small percentage of the loan and syndicates the rest to other banks.