Foreign banks that are not well known in the United States may seek this type of financing because they are unable to sell their own acceptances, or are unable to sell them at reasonable prices, in the U.S. market. Acceptances are also created to finance the shipment of goods within the United States and to finance the storage of goods in the United States and abroad. Borrowers in the acceptance market are mostly firms engaged in U.S. imports and exports as well as foreign banks seeking to finance international trade not involving the United States. Over the last decade, these borrowers relied less and less on acceptances as a source of financing. Acceptance, as a source of financing for importers and exporters, has to compete with commercial paper, Euro commercial paper, and bank loans.
Commercial paper is probably the cheapest alternative for borrowers with prime ratings.
Borrowers with less than prime ratings can take out bank loans, issue Euro commercial paper, issue commercial paper with credit enhancements, or issue asset-backed commercial paper. Borrowers of the latter type may find acceptance financing an attractive alternative. Apparently, borrowers increasingly do not find acceptance financing as such an attractive alternative. The percentage of U.S. foreign trade financed by acceptances fell from 25 percent to 10 percent. Foreign banks with no presence in the United States may finance their own acceptances by drawing refinancing acceptances on American banks or by issuing Eurodollar liabilities.