Short-term credit instrument consisting of a written order that requires a buyer to pay a specified sum to the seller at a given date, signed by the buyer as a promise to honor the obligation. Acceptances are often used in export/import transactions: an exporter may require a buyer to sign and return an acceptance, which the exporter can then sell to the bank at a discount, thereby obtaining payment promptly. The buyer then has until the bill's maturity date to dispose of the goods and pay the promised sum (now owed to the bank). Seealso bill of exchange; promissory note.

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An acceptance credit is a type of letter of credit that is paid by a time draft authorizing payment on or after a specific date, if the terms of the letter of credit have been complied with. There are two types of acceptance credit, confirmed and unconfirmed. Unconfirmed acceptance credit means that the seller takes the risk that payment will not be made, due to any number of contingencies such as shipment nondelivery, confiscation by customs authorities, or any other problems. Confirmed acceptance credit means that the bank upon which the credit has been issued, essentially guarantees payment as long as the terms of the letter of credit have been complied with.

Confirmed acceptance credit is more expensive to establish than unconfirmed acceptance credit because the issuing bank is effectively guaranteeing payment. It also transfers the risk of non-delivery to the recipient, because once the seller places the product in the hands of the shipping company, the seller has complied and will be paid; if the shipment does not arrive, is delayed or other problems occur, the buyer cannot stop payment or otherwise prevent redemption of the acceptance credit.

References

• Wachovia bank list of terms, [http://www.wachovia.com/helpcenter/page/0,,2356_2366%5E2%5Elist%5EA_789,00.html accep