There are many types of loans. Among them are mortgage, consumer, loans for all types of businesses. Each service has its own design features and conditions of receipt. Banks offer customers to use another form of loan - bill loans. This procedure has its own design subtleties, which will be presented later.
A bill of exchange is the main instrument in credit and settlement operations. Its occurrence is associated with the need to transfer funds from one region to another, as well as in financial transactions of an international scale. It is also used for currency exchange transactions. The service has its advantages and disadvantages. We will talk about this later.
The bill is considered one of the main instruments of credit and settlement operations. As mentioned above, its appearance is associated with the need to transfer money from one region to another and in the exchange of coins for foreign currency. After reading the article, you will delve into the main features of such a thing as bill of credit.
The concept
A bill of exchange is the type of security that an enterprise issues. Then it can be sold to legal entities and individuals. Such operations are necessary for the issuing company to receive the missing money. Each bill has a specific return period. This means that the owner of securities at certain times may require their exchange for invested money.
In such operations, cash consideration is paid. Therefore, a bill of credit is a kind of purchase and sale transaction. The loan rate correlates with the maturity of the securities. In the contract drawn up with such lending, there is information about the timing of payment of the debt.
Types of bills
Now 2 types of these papers are issued:
- Promissory note. It contains a requirement for the return of the indicated amount within the specified time.
- Transferable. With him, the funds are transferred to a third party.
The time during which securities are drawn up and issued is determined on the basis of agreements between the borrower and the lender. The maturity of the bill is from 3 to 12 months. The period is set individually. For example, if you arrange loans for 3 months, then this will be short-term lending. Long-term bills are issued for a period of more than a year. Interest on the bill is about 5-8% per annum. This is slightly less than regular loans.
Features
A bill of credit has more favorable terms in comparison with classic loans. Features associated with the short term of such loans. The repayment period is not more than 1 year.
Prior to the expiration of the agreement, the client must pay the bank a fee and compensation for the securities. These payments occur at a time. The size of the commission is not determined by the size of the loan, which was valid during the term. More precisely, there is no amortization of the loan. Under the agreement, the date of payment of the loan does not coincide with the day of reimbursement of the bill. It should be earlier.
Registration
Types of bill loans allow you to choose the most suitable option. The first group includes bearer, including accounting, mortgage. They are drawn up by a legal entity by transferring in exchange for a certain amount.
The second group includes promissory notes. The guarantee will then be securities. Legal entities that have completed all stages of the procedure may receive a loan to purchase a bill. With this paper, the company pays the supplier for the product. Types of bill loans are in high demand.
With the sale of goods and receipt of money, the legal entity transfers to the bank the amount taken with interest. Thanks to the bill, which is owned by the supplier, it can pay off counterparties. He has the right to return securities to the bank and receive money for them.
Business tasks
The lending method is famous for attractive opportunities for the borrower and the supplier-counterparty. The legal entity has the opportunity to reduce the period of settlements with suppliers. A divergence of funds is likely in the future.
The supplier is protected against the risk of default. He shortens the time interval between the shipment of goods and receiving money for it. The supplier company uses the bill for its own settlements with counterparties. Using this service, the Bank attracts new customers without spending money on it. An organization that wants to pay bills must be recognized by banks. The company will have the opportunity to cash out.
Conditions
Making such a service, a credit institution exposes itself to 3 types of risks - credit, interest, and liquidity. To ensure that they are minimal, banks offer some requirements for customers:
- The ability to provide collateral, which may be government loan bonds, inventories, real estate.
- Implementation of activities throughout the year.
- Profitability confirmed by transfers of money to a current account.
If the client meets the conditions, then he can count on getting a loan. A small rate is the main advantage of such services. Making them profitable for enterprises that can not use loans of another type.
Customer Credit Rating
When considering the application, specialists study the financial situation of the client. This is necessary to confirm solvency. To do this, banks need to provide information such as:
- company name, address;
- list of leaders;
- list of branches;
- composition of circulating and fixed assets;
- list of existing loans;
- equipment description;
- delays;
- purpose of lending.
The company must have an annual financial report, balance sheet of the organization, a plan of production and economic sphere, insurance policies, charter. Creditworthiness is assessed according to information from other banking organizations, media reports, and the services of independent auditors.
Benefits
Bill loans have several advantages. Loans have a favorable effect on the financial and economic system of the country. A commercial bill increases the volume of purchased goods with cheaper loans and an increase in deferred payment.
Organizations that use securities to pay for suppliers' services are eligible for VAT refunds on purchased products. Such transactions minimize the risk of non-payments, since the responsibility lies with the banking organization that sold them.
Bank loans issued by banks are simplified. Mutual settlements performed using highly liquid bills are needed to reduce the rate. This is because papers are like money.
Minuses
Although the service has its advantages, bill loans have many disadvantages. There are reasons that lower the popularity of this financial instrument. Loans are in the financial expenses of the borrower. The client’s money is lost, not only because of the discount, but also because of interest.
For the creditor company, the service also has negative factors. The main one is the emergence of risks that cause the protest of securities and amounts reserved legally. Nevertheless, one should not refuse bill loans. This is especially true of cases of bill elements that have a high level of activity.
Call loan
Obtaining an on-loan loan involves issuing a loan secured by bills that the client already has. The distinctive features of this service include the following factors:
- Does not transfer ownership of bills to the bank.
- Papers are pledged only for the approved period with a buyback.
- If the client fails to fulfill obligations, he loses the right to the bill.
- Loans are issued in the amount of bills.
Thus, an on-call loan is considered a type of bill. The result of using the bill system is associated with increased sales, revenue growth, and improved solvency. The banking system is based on corporate clients, therefore, favorable conditions are offered - reliability, stability and simplicity of the procedure.