Acceptance financing shifts the exposure of the importer's default risk from the lender to the bank.

Question

Quizplus · Accepted Answer

Acceptance financing involves a bank accepting drafts and thereby agreeing to pay the amount at maturity to the seller on behalf of the buyer. This shifts the risk of the importer's (buyer's) default from the seller or any initial lender to the bank, as the bank now assumes the responsibility of ensuring payment.

Acceptance Financing Shifts the Exposure of the Importer's Default Risk