InfraDefence glossary.
44 terms used in defence financings, export credit and M&A, in plain English.
A
- Asset-based lending (ABL)
- Lending sized and secured against receivables, inventory and other working assets rather than cash flow.
- Assignment of Claims Act
- The US statutes (31 U.S.C. 3727 and 41 U.S.C. 6305) that let a contractor assign payments under a government contract to a bank or other financing institution, if the contract allows it and notice is given to the government.
B
- Bookrunner
- A bank that runs the order book for a bond or share issue and allocates it to investors. The register names bookrunners from each prospectus filed with the SEC.
- Borrowing base
- The amount a borrower can draw under an asset-based loan, calculated as a percentage of eligible receivables and inventory.
- Buyer credit
- A loan to the buyer of an export, or to its bank, usually from commercial banks with an export credit agency guaranteeing most of it.
C
- Certain funds
- Acquisition financing that the lenders can refuse to fund only in very limited cases, required for UK public takeovers so the bidder can show it can pay.
- CFIUS
- The Committee on Foreign Investment in the United States, which reviews foreign investment in US businesses for national security risk and can require mitigation or block deals.
- Common procurement
- A purchase made jointly by at least two participating countries. Under SAFE it is the default route for using the loans, with single-country purchases allowed only for a transitional period.
- Conditional commitment
- A lender's agreement in principle to lend, subject to conditions such as raising equity and signing final documents. OSC announces its loans at this stage.
- Controversial weapons
- Weapons banned or restricted by international conventions, usually anti-personnel mines, cluster munitions, and chemical and biological weapons, often with nuclear weapons outside the Non-Proliferation Treaty. Most exclusion lists start with these.
- Covered technology categories
- The 31 technology areas listed in the 2024 NDAA that the Office of Strategic Capital can support, from critical minerals to microelectronics and autonomy.
- Credit subsidy
- Under US federal credit rules, the expected cost of a government loan to the taxpayer, after repayments. Congress appropriates the subsidy, not the loan amount, so a small appropriation can support a large loan book.
D
- Delayed-draw term loan (DDTL)
- A term loan that is drawn in stages after signing, usually against construction milestones or acquisitions, rather than in one amount at closing.
- Design authority
- The ability to decide on and change a product's design without restrictions from another country. SAFE requires it for its second category of products, such as air defence and drones.
- Dual-use
- Goods, software and technology that have both civil and military uses. They are export controlled, and some lenders and agencies treat them differently from purely military items.
E
- ECA direct lending
- A loan made by the export credit agency itself rather than guaranteed through banks. UK Export Finance's capacity for defence direct lending was raised to £10bn in March 2025.
- EIB security and defence lending
- Loans from the European Investment Bank for security and defence projects, widened in 2024 and 2025 to cover more dual-use and defence investment, often lent through commercial banks to smaller companies.
- End-user certificate
- A buyer's formal statement of who will use exported military goods and for what, required for export licences and often a condition to ECA-backed drawings.
- European Defence Fund (EDF)
- The EU's grant programme for collaborative defence research and development, awarded through annual calls. Unlike SAFE, it gives grants, not loans.
- Exclusion list
- A bank's or fund's list of activities it will not finance. In loan documents it appears in use-of-proceeds covenants, representations and lender exit rights.
- Export credit agency (ECA)
- A government agency or state-backed company that lends to, guarantees or insures buyers of its country's exports.
F
- FOCI (foreign ownership, control or influence)
- The US test for whether a foreign owner could affect a cleared defence contractor. Where FOCI exists, the contractor must agree mitigation, such as a special security agreement or proxy board, to keep its facility clearance.
- Foreign Military Financing (FMF)
- US government grants and loans that help allies buy US defence equipment, usually through Foreign Military Sales. It fills the gap left by US EXIM's general bar on financing defence exports.
I
- ITAR
- The US International Traffic in Arms Regulations, which control exports of defence articles, services and technical data. Registered companies must give 60 days' notice before a sale of ownership or control to a foreign person.
L
- Long-stop date
- The date by which a deal's conditions must be met, after which either side can walk away. In defence M&A it must allow for every screening regime.
M
- Ministerial direction
- In the UK, a written instruction from a minister that lets an agency act beyond its normal limits. UK Export Finance has used them for the largest defence deals, and they are published.
- Mitigation
- Conditions a government imposes to approve a deal on national security grounds, such as commitments on UK capabilities, cleared staff, data access or board composition.
N
- National Security and Investment Act (NSIA)
- The UK law, in force since January 2022, requiring approval before completing acquisitions of control in 17 sensitive sectors, including defence. Deals completed without approval are void.
- No-setoff commitment
- A clause in some government contracts, used mainly in wartime or national emergencies, that stops the government setting off its own claims against payments assigned to a lender.
O
- OECD Arrangement
- The OECD Arrangement on officially supported export credits, which sets minimum premiums, maximum tenors and repayment rules for civil export credit. It does not apply to military equipment.
- Office of Strategic Capital (OSC)
- The US Department of Defense office that makes direct loans to companies building production capacity in critical technologies. It was set up in December 2022 and given statutory loan authority in the 2024 NDAA.
- Oslo Convention
- The 2008 Convention on Cluster Munitions, which bans their use, production and transfer. Several countries also ban financing their production.
- Ottawa Convention
- The 1997 treaty banning anti-personnel mines. In 2025 Poland, Finland and the three Baltic states began withdrawing from it.
P
- Performance-based payments
- Government payments made when defined milestones are reached, before delivery. As with progress payments, the government usually takes title to the related work.
- Pre-financing
- An advance paid when a loan agreement is signed, before spending is shown. SAFE pays 15% of each loan as pre-financing.
- Principal adverse impact (PAI)
- An indicator under SFDR that funds report on. Exposure to controversial weapons is one of the mandatory indicators.
- Progress payments
- Payments a government customer makes as costs are incurred, before delivery. Under the standard US clause, title to the materials and work in progress passes to the government.
R
- Revolving credit facility (RCF)
- A committed bank facility the borrower can draw, repay and draw again during its life, used by most defence primes as a liquidity backstop.
S
- SAFE (Security Action for Europe)
- The EU's €150bn loan instrument for defence procurement. The Commission borrows on the capital markets and lends to member states on long terms, mainly for joint purchases with other participating countries.
- SFDR
- The EU Sustainable Finance Disclosure Regulation, which requires funds and advisers to disclose how they handle sustainability risks. The Commission's December 2025 notice says it does not restrict investment in defence.
- Sustainability-linked loan (SLL)
- A loan whose margin moves up or down as the borrower meets or misses agreed sustainability targets. The money can be used for any purpose.
T
- Termination for convenience
- A government customer's right to end a contract at any time for its own reasons, paying for work done and a reasonable profit on it, but not for the profit on work cancelled.
U
- Undertakings (national security)
- Binding commitments a buyer gives a government to obtain approval of a deal.
W
- Warrants
- Rights to buy a company's shares at a set price. Lenders sometimes take them alongside a loan to share in the upside.
