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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Advance rate

What is an advance rate in receivables and trade finance?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

The advance rate is the percentage of eligible collateral value a financier will fund — in Issue 02, the senior read caps the USD sub-limit at 80% of eligible USD receivables. The unfinanced margin is structure, not meanness: it keeps the client's own money in the transaction and absorbs the uncontrollables — disputes, currency movement, dilution — before the facility goes underwater. A request to finance one hundred percent of anything is itself information, and the question it raises is why the client has no margin of their own in a deal they expect to profit from.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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