Payments & Drafts check0 / 1 answered · 0 correct
Check 1
Why might an accepted bank draft be easier to finance than an unaccepted corporate draft?
Banker’s Acceptance
See how a time draft can become an accepted bank obligation.
Acceptance
When a bank accepts a qualifying time draft, it undertakes to pay that draft at maturity according to the acceptance.
Why acceptance matters
The holder may now have an obligation of the accepting bank rather than relying only on the original commercial debtor, subject to the instrument and law.
Discounting
An accepted time obligation may potentially be discounted before maturity if a financier is willing to buy or finance it. Pricing depends on bank risk, tenor, market conditions and documentation.
LC connection
Some usance documentary credits historically use drafts drawn on a bank for acceptance. Modern credits can also use deferred payment without a bill of exchange. Read the availability and tenor carefully.
Remember thisAcceptance creates a bank payment obligation on the accepted draft; it does not mean every usance LC must use a draft.
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