Bankers' Acceptances

A banker’s acceptance is a financial instrument used in international trade to ensure payment. It involves a bank guaranteeing that a buyer will pay a seller a specified amount at a future date. The bank "accepts" the draft, promising the payment, which makes the instrument secure and tradable. This allows merchants to finance transactions more easily, often at lower costs, by selling the acceptance to investors before the payment date. Essentially, it provides a reliable payment guarantee backed by a bank, facilitating smoother international commerce and reducing credit risk for sellers.