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A banker’s acceptance (or BA) is a financial instrument used to guarantee large future transactions, often in the import/export markets. As a debt instrument, it can function as an investment, commonly traded between large banks and institutional investors on the secondary market. It can trade at a discount to par like U.S. Treasury bills in money markets.

BAs play a key role in facilitating international trade and in broader fixed-income markets. While you may not own an individual banker’s acceptance in your checking account, these instruments help promote sound and liquid markets.

What Is Banker’s Acceptance?

A banker’s acceptance (which you may see written as bankers acceptance) is a short-term form of payment guaranteed by a bank; it is often used for international trade transactions.

Banks often make money on the spread between the buy and sell price on a fixed-income asset or through fees and commissions. BAs commonly have a maturity of between 30 and 180 days and trade at a discount to par. Functioning like a post-dated check, they are seen as a relatively safe method of payment for large transactions. BAs are considered short-term debt instruments.

Here are some more details about banker’s acceptance and how these instruments work.

•   The BA is issued and priced based on the creditworthiness of the issuing bank. An investment banker earns a commission for making the transaction.

•   Only customers with a strong credit history can access the BA market. These entities are often corporations involved in international trading (import/export) markets.

•   A banker’s acceptance can also be highly marketable and liquid, allowing money to transfer from one bank to another.

How Banker’s Acceptance Works

A banker’s acceptance is considered a time draft. A business can request one from a bank as a way of gaining enhanced security while conducting a deal. The bank essentially promises to pay the firm that is exporting goods a particular amount of money on a certain date. When it does this, it takes funds out of the importer’s bank account.

Typically, the term of a banker’s acceptance is between 30 and 180 days.

Who Issues Banker’s Acceptance?

Not all banks offer BAs. Businesses with a good relationship with a large bank can obtain a banker’s acceptance. It can be an appealing product for an institution entering a large-value transaction. Like signing a check over to someone, the account holder must have enough cash to execute the transaction.

More than a simple checking account transaction, though, obtaining a BA typically requires an amount of credit to be detailed. There are usually fees involved in obtaining a BA, too.

Who Buys Banker’s Acceptances?

Banker’s acceptances are traded by banks and securities dealers on a secondary market, similar to how debt instruments are traded. They are available for a discount on its face value. The exact value may vary with the rating of the bank that has promised payment on the banker’s acceptance.

How Banker’s Acceptance Is Used

Here’s more detail on how banker’s acceptances can be used.

Checks

Think of a banker’s acceptance as a certified check. It’s a relatively safe way to do a transaction. The money owed is guaranteed on a specific date listed on the BA bill. Credit analysis is usually done to verify the creditworthiness of the issuer, so it’s a bit different than how a bank will verify a check before you deposit it.

BAs are frequently used to facilitate the international trading of goods. A buyer of imported products can issue a BA with a payment date after a shipment is scheduled to be delivered. The seller exporting can then take payment before finalizing the shipment. The exporter in this case can hold the BA to maturity or sell it on the secondary market. Unlike a check, the BA is backed by the guarantee of the bank, not an individual.

Investments

Aside from the import/export market, bankers’ acceptances are used commonly in the investment world. Buyers might purchase a BA and hold it to maturity to effectively earn a rate of return on short-term money. Since BAs are seen as very low-risk products, they are used as a cash-like security.

Still, retail consumers usually won’t be able to purchase a BA in an online or traditional retail bank. The purchase is, as noted above, only available to certain financial entities.

Recommended: What Are Some Safe Types of Investments?

Pros and Cons of Banker’s Acceptance

There are a number of positive aspects of bankers’ acceptances to consider.

Pros

First, the upsides of BAs:

Provides Seller Assurances Against Default

Backed by the guarantee of a bank, a banker’s acceptance is regarded as a high-quality fixed-income security that is often liquid and highly marketable. For importers and exporters, financial transactions can be made to facilitate international trading of goods without the risk that one party goes bust.

Buyer Does Not Have to Prepay for Goods

A banker’s acceptance works like a promissory note so the buyer does not have to prepay. Liability can immediately transfer from the issuer of the banker’s acceptance to the bank. The payment is likely debited only on the due date.

Enhances Confidence in the Deal

Part of the process of issuing a banker’s acceptance is usually having a good credit standing and a relationship with a major bank. Since high-risk customers might not be considered, there is strong confidence in BAs traded. There would be no need for the exporting company to worry about default risk; that lies with the banker. While individual investors often do not engage in BA trading, there are important traditional banking alternatives that feature financial solutions to help facilitate transactions.

Cons

While there are many positive aspects of bankers’ acceptances, there are still some risks for those involved in the transaction and trading of BAs. Consider the following:

Bank May Require Buyer to Post Collateral to Hedge Risk

Collateral is sometimes required for a deal to happen. Collateral provides a backstop should the importer be unable to pay. It can reduce risks to the bank and expedite the deal. Think of it like seller concessions to get a deal done, though collateral is generally not used when buying and selling a home.

Buyer May Default

With a banker’s acceptance, the bank accepts default risk, which can be a downside. The issuing bank typically must honor the payment terms even if the account holder, perhaps an importing/exporting corporation, does not have the cash on the payment date. Not all banks choose to be in this market due to the risk that the buyer could default.

Potential Liquidity Risk

Liquidity risk means an individual or financial institution cannot meet its debt obligations in the short term. Investors may not encounter liquidity risk with a banker’s acceptance instrument, but the issuing bank could have liquidity risk from the importer who must pay. This may be a key consideration for a bank issuing a BA. The secondary market for banker’s acceptance products remains highly liquid.

The Takeaway

A banker’s acceptance is a debt instrument that plays a key role in well-functioning capital markets. BAs help facilitate international trade through bank guarantees. Knowing about this important fixed-income product type can help individuals understand financial markets and institutions.

When it’s time to take a look at your personal banking partner, it can pay to shop around for the right fit.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the difference between a letter of credit and a banker’s acceptance?

A letter of credit is a financial instrument that a bank issues for a buyer (the bank client) guaranteeing that a seller will be paid. A banker’s acceptance, on the other hand, guarantees that the bank will pay for a future transaction, rather than the individual account holder.

What is a banker’s acceptance in a real-life example?

An example of a banker’s acceptance would be that, on April 1st, the Acme Bank sends a BA to Back-to-School Supplies, saying it will make funds available on June 1st for a shipment of goods for their client. On June 1st, the school supply company will be able to withdraw those funds.

How safe are banker’s acceptances?

Banker’s acceptances are a relatively safe transaction for all involved, but the exact degree will vary with the creditworthiness of the bank guaranteeing the funds.

Is a banker’s acceptance a short-term investment?

Banker’s acceptances are considered a short-term investment or debt instrument. They are usually traded at a discount, and they are seen as similar to Treasury bills.

Is a banker’s acceptance a loan?

A banker’s acceptance isn’t a loan. It’s a short-term debt instrument, typically with a maturity date of 30 to 180 days.

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Studying abroad can be a life-changing opportunity that will enrich your college experience. But that enrichment can come with a strain on your bank account. If you’ve always wanted to head overseas, your college years are a great time to do it. But can you afford it?

If you’re looking for how to get money to study abroad, there are a few different student loan options that may be worth exploring. Whether you’re about to head off to college, currently enrolled, or in graduate school, student loans may be available to help finance your trip. Read on to understand how student loans to study abroad work.

Can Student Loans Be Used for Studying Abroad?

As mentioned, studying abroad can be an outstanding opportunity for a college student to expand their cultural horizon, meet new friends, and maybe learn a new language. While this can be an incredibly enriching experience, it’s important to factor in both the pros and cons of studying abroad — it can also be expensive.

Costs for studying abroad vary depending on where you go, what you study, and how long you stay, but average costs can hover around $16,000 per semester as of 2023. Students can use a combination of savings, federal student loans, private student loans, and some scholarships or grants to pay for their study abroad experience.

Federal Student Loans for Studying Abroad

It’s possible to use federal student loans to pay for your study abroad experience. Federal student loans can be used to pay for any qualifying educational expense — you can even use student loans to pay for living expenses like rent or room and board.

To get federal financial aid — which includes grants and loans — you’ll need to complete the FAFSA® each year. The financial aid office at your domestic university should be able to tell you which forms of aid can be used to cover study abroad expenses. Be sure to file your FAFSA in plenty of time and check in with both your American school and the international school as additional paperwork may be required.

Recommended: How to Complete the FAFSA Step by Step

Private Student Loans for Studying Abroad

Federal financial aid may cover some expenses for certain study abroad programs, but there might not be enough cash to cover the whole experience. That’s where private student loans could come in handy.

Private student loans are available from private financial institutions and can be used to cover up to a school’s cost of attendance, less other forms of financial aid. Unlike most federal loans, private lenders will generally review information about the applicant including their credit score, among other factors, when making their lending decisions.

There are a few things to keep in mind before taking out a private student loan for study abroad, including:

•   Interest rate: A high interest rate can cause you to pay significantly more than you expected. Also, see if you’re signing up for variable or fixed interest rate loans, as variable rates fluctuate up and down depending on the markets.

•   Repayment: Review loan terms to see when you will start paying back your student loans. Federal loans usually start student loan repayment six months after graduation (or when you drop out or drop below part-time hours), but private loans can vary in their repayment schedule. Some may require you to start repayment even while you’re in school. At the very least, consider looking for loans that don’t require repayment until after you’ve graduated.

Private student loans can be a tool to help students pay for college and study abroad costs, but because they don’t necessarily offer the same protections (like income-driven repayment options or forgiveness) as federal student loans, they are generally borrowed after other options have been exhausted.

Recommended: Guide to Private Student Loans

Grants and Scholarships

Many grants and scholarships can be used to help students pay for studying abroad costs. Some scholarships may require students to participate in specific study abroad programs, so be sure to review the details of each application closely. Looking for study abroad scholarships? Check out SoFi’s scholarship search tool.

Depending on your school’s policies and the program you choose, you may be able to use the institutional or federal financial aid you receive to pay for study abroad costs. Some schools may require that you participate in a study abroad program affiliated with the school in order to apply institution-specific aid to the study abroad program. Check in with your school’s financial aid office to be sure.

Are Student Loans for Studying Abroad Different From Typical Student Loans?

Student loans for studying abroad are not different from the typical student loans used to pay for college. Federal student loans can be used to pay for study abroad costs so long as the program is offered through an eligible institution. As mentioned, you may be required to fill out additional paperwork for federal financial aid if you are studying abroad, so check in with your financial aid office to determine any requirements.

Determine How Much Your Study Abroad Will Cost

To determine how much you’ll need to borrow to pay for your study abroad experience, you’ll need to figure out how much the experience will cost in comparison to a typical semester. Continue reading for some of the study abroad costs to consider.

Tuition

Tuition costs vary depending on the program type and location. Some schools may offer affiliate programs for study abroad, which may have similar tuition costs to attending the university in-person.

Other programs may offer direct enrollment at a local institution in the destination country. Enrolling directly in a local school may allow you to secure a more affordable tuition, but you may be responsible for additional costs like health insurance or rent.

Living Expenses

Consider the living accommodations available in the program you have selected. If you are working with your school or another third-party provider, they may have living accommodations set up for you. If you are enrolling directly with a local university, you may need to find an apartment to rent or live in on-campus housing (if available). Review the options at your destination closely. This guide has more information on college money management that could help you build out your study abroad living expenses budget.

Travel Expenses

Factor in not only the expense to travel to your initial destination, but also any additional travel costs you may incur during your semester abroad. For example, if you are living in Paris for a semester, will you be taking any weekend trips elsewhere in Europe? Map out your other travel plans and estimated prices for flights, trains, hostels, and food. You could consider setting up a dedicated travel fund to save for your semester abroad.

Graduate Study Abroad Loans

If you’re in search of how to get money to study abroad, when you go can be just as important as where you go. Undergraduate degrees are usually less expensive than graduate ones (though this may depend on the field of study), which means studying abroad during undergrad may also be less expensive. Graduate student loans are a bit different from undergrad ones in a few ways, including:

•   Higher interest rates, higher limits. Since graduate degrees are more expensive than undergraduate ones, you can borrow more money with graduate loans. Unfortunately, graduate loans also tend to have higher interest rates.

•   Unsubsidized loans. Undergraduate students may qualify for Direct Subsidized Loans, or loans where the federal government pays your interest rate while you’re in school. Direct Unsubsidized Loans for graduate studies start accruing interest while you’re in school. This could be costly once you graduate.

Do your research on the different student loan options, and if you have flexibility in your timing, you may wish to consider going abroad as an undergraduate rather than as a graduate student. You could potentially save some money in the long run.

Private Student Loan From SoFi

Both federal and private student loans can be used to pay for costs associated with qualifying study abroad programs. The requirements for federal loans may vary depending on the program you are enrolling in, so check in with the financial aid office at your school.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

Can I use student loans to receive a degree from an international school?

Yes, you can use student loans to receive a degree from an international school, but the availability and type of loans will depend on several factors, including the country and the specific institution. Many U.S. federal student loans can be applied to eligible foreign institutions that participate in the Federal Student Loan Program.

Additionally, private lenders may offer loans for studying abroad, often with different terms and requirements compared to federal loans. It’s crucial to research and confirm the eligibility of the international school for federal student loans and to explore various private loan options.

Can you get a federal student loan to study abroad?

Yes, federal student loans can be used to pay for study abroad expenses. There may be some additional requirements so check in directly with your college’s financial aid office.

However, if your school does not participate in the federal aid program, you likely will not be able to secure financial aid to study abroad either.

Are there special loans for studying abroad?

Both the federal and private student loans can be used to pay for study abroad expenses. It’s possible to apply for a private student loan specifically to study abroad, but these loans are generally the same as student loans used to pay for classes at your American school.

What are other ways to finance studying abroad aside from loans?

Students may also be able to use savings, scholarships, or grants to pay for study abroad costs.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Solar energy investing focuses on companies or funds focused on some aspect of the solar energy industry. You can invest in the solar energy industry by putting money into companies involved in some part of the solar power supply chain, including manufacturers of solar panels and operators of solar energy facilities. Investors can also profit from solar energy by installing solar panels on their homes.

Solar energy is one of the most popular and growing renewable energy sources. There are several ways to invest in solar energy for investors interested in supporting an industry that may help reduce dependence on traditional fossil fuels and help combat climate change.

What Is Solar Investing?

Solar investing generally refers to investing in companies that produce or sell solar energy products. This can include solar panel manufacturers, installers, or companies operating solar energy facilities. Investors usually invest in solar through traditional products like stocks, mutual funds, and exchange-traded funds (ETFs).

Another common type of solar investing is the installation of solar panels on a home or business. Solar panels can be used to power all or part of a home or business, and the electricity generated can offset the cost of an energy bill. Investors can also use solar panels to generate income by selling their electricity back to a utility company.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

💡 Recommended: Beginner’s Guide to Sustainable Investing

What Is Solar Energy?

Solar energy is a form of renewable energy that comes from the sun; it is an abundant source of energy that can be used to generate electricity, heat water, and provide other forms of energy for homes, businesses, and communities.

Solar energy is generally generated by solar panels, which are made up of photovoltaic (PV) cells that convert sunlight into electricity. Solar panels can be installed on an individual’s home or business or arrayed across open spaces that experience strong sunlight.

Though solar panels are common for most consumer and business applications, thermal solar is another type of solar energy. Thermal solar energy utilizes mirrors to reflect and concentrate sunlight onto receivers that collect the energy and convert it to heat, which can then be used to produce electricity or stored for later use. It is used primarily in large power plants.

Solar energy is considered a clean and sustainable energy source that can help reduce the dependence on fossil fuels to combat climate change. Analysts expect renewable energy sources like solar will make up a more significant portion of all energy generation in the coming decades.

Benefits and Risks of Investing in Solar

The trend of investing in renewable energy sources like solar energy is rising as the public becomes more aware of the environmental and economic benefits. However, before investing in this sector, there are benefits and risks to consider.

Benefits

A benefit of investing in solar is that it provides a renewable energy source that can help reduce your carbon footprint. This can be appealing to investors interested in environmentally friendly and socially responsible investing.

Solar energy is also sustainable, especially compared to fossil fuels and traditional energy sources. The amount of oil and coal in the ground is limited, but the sun, hopefully, isn’t going anywhere. Investors interested in investments with long-term growth potential may prefer solar energy to other energy stocks.

Additionally, if you install solar panels on your home, it can increase the value of your property.

Risks

A primary risk of solar energy is that it is intermittent, meaning that solar energy is only generated when the sun is shining. Solar energy is only available during daylight, and a cloudy day may interfere with energy production. While this is a problem, technology is advancing so solar energy can be more adequately captured and stored during periods of extreme sunshine.

Another downside to solar energy is that many technologies in the sector require rare earth materials in the production process. The solar industry must compete with other industries for these scarce resources. Because there can be supply and demand issues for these commodities, it can increase costs for solar energy producers.

And though solar energy is a renewable resource, that doesn’t mean it doesn’t create any harm to the environment. The materials used in solar technologies are difficult to dispose of and recycle, which cuts into the sustainability claims of solar energy investments.

💡 Recommended: What Every New Investor Should Know About Risk

4 Ways to Invest in Solar Energy

Investors can invest in solar energy by putting money into the stocks and bonds of companies in the solar energy industry. Mutual funds and exchange-traded funds (ETFs) with solar energy or renewable energy-focused strategies are also potential investment vehicles for those interested in adding solar energy to their portfolio.

Regardless of the type of investment vehicle, investors need to remember that many companies and funds are diversified, meaning they may be involved in sectors other than solar energy. For investors that want to invest in purely solar energy companies or funds, it’s essential to do research into potential investments.

Stocks

Investors can put money into various publicly-traded companies involved in some aspect of the solar energy industry. Solar energy companies may include manufacturers of components for solar technologies, installers of solar panels, and firms that operate solar energy facilities.

Some companies involved in the solar energy industry include:

•   Enphase Energy (ENPH): This company designs and manufactures technologies that turn sunlight into energy

•   SolarEdge Technologies (SEDG): This firm creates products that help photovoltaic systems convert solar energy into power

•   First Solar (FSLR): This company is a manufacturer of solar panels and a provider of utility-scale photovoltaic power plants

•   Sunrun (RUN): This firm is a leading provider of residential solar panels

•   Daqo New Energy (DQ): This company manufactures monocrystalline silicon and polysilicon, primarily for use in solar photovoltaic systems

Mutual Funds and ETFs

Investors who don’t want to pick individual stocks to invest in can always look to mutual funds and exchange-traded funds (ETFs) that provide exposure to solar energy companies and investments.

Several index funds invest in a basket of companies in the solar energy industry. These funds allow investors to diversify their holdings by investing in one security. However, not all solar energy funds follow the same criteria and may focus on different aspects of solar energy. These funds may also have holdings in traditional energy and utility companies that only are partially involved in the solar energy industry.

Bonds

The bonds of corporations involved in solar energy business practices can be a good option for investors interested in fixed-income securities. Green and climate bonds are bonds issued by companies to finance various environmentally-friendly projects and business operations.

Additionally, government bonds used to fund solar energy projects can be an option for fixed-income investors. These bonds may come with tax incentives, making them a more attractive investment than traditional bonds.

Install Solar Panels

As mentioned above, investors who want to profit from solar energy can purchase solar panels and install them on a home or business. This may be an appealing way to save money on your energy bills, generate income by selling electricity to a utility company and helping reduce your carbon footprint.

How to Start a Solar Investment Portfolio

If you are ready to start investing and want to build a portfolio of solar energy investments, you can follow these steps:

Step 1: Open a brokerage account

You will need to open a brokerage account and deposit money into it. Once your account is funded, you can buy and sell stocks and other securities. SoFi Invest® offers an active investing platform where you can start building your solar energy portfolio.

Step 2: Pick your assets

Decide what type of investment you want, whether in a company’s stock, a solar energy-focused ETF or mutual fund, or bonds.

Step 3: Do your research

It’s important to research the different companies and funds and find a diversified selection that fits your desires and priorities.

Step 4: Invest

Once you’re ready, make your investment and then monitor your portfolio to ensure that the assets in your portfolio have a positive environmental and financial impact.

It is important to remember that you should diversify your portfolio by investing in various asset classes. Diversification may help to reduce your risk and maximize your returns.

The Takeaway

Solar investing has become increasingly popular in recent years as the cost of solar panels has fallen and the technology has become more efficient. Solar panels are now available for a fraction of the cost of traditional electric power, and they are becoming more efficient at converting sunlight into electricity.

Investing in the solar energy industry may be a way to profit from the growth outlook for solar energy. However, it’s necessary to do your homework before investing in any solar company or fund or installing solar panels on your home.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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