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Commercial Draft Discounting


 

Introduction

Commercial draft discounting means a financing operation that a bearer of commercial drafts transfers the draft to a financial institution for cash with some interest discounted before maturity date of the draft, a way of financing from the bearers by financial institutions.

Commercial draft discounting is a crediting business of the bank, where payee or bearer applies the bank for discounting an immature bank acceptance draft or commercial acceptance draft, and the bank pays the applicant the balance after deduction of discounted interest according to the face value. As the drafts discounted, the discounting bank can collect payment from the acceptors as drafts matured.

Features

1. Draft discounting is an effective and useful financing method;

2. The immature commercial drafts held by customers can be rapidly cashed by discounting business with convenient procedures and lower financing costs;

3. The applicant can receive amount of financing advanced by the bank, which could improve corporate fund turnover and utilization efficiency.

Discount Rate

Generated by spread on basis of 3M SHIBOR.

Term

The maximum term is six months.

Target Customers

Companies and legal organizations registered within the territory of the People's Republic of China, having deposit accounts and valid loan card and holding commercial drafts which could be proven dependable resources of acquisition and real relationships of transactions.

Application Qualifications

1. Valid commercial drafts with complete basic elements, drawn according to The Law on Negotiable Instruments of the People's Republic of China and Methods of Payment and Settlement of the People's Bank of China.

2. Issuance, acquisition and transfer of commercial drafts shall be in compliance with the principles of honesty and credit, and shall possess real relationships of transactions and credit and debt.

Required Documents

A. The applicant who applies for the first time or has any change of fundamental information must submit qualification certification documents or relevant legal documents (copies, if any, shall be sealed and checked against originals) which include, but not limited:

1. Business license with yearly verification (copy);

2. Tax registration certificate (copy);

3. Loan card and its password (copy);

4. Organization code certificate (copy);

5. Power of attorney for the person in charge (the original or sealed copy).

B. The first page of discounting certificate, sealed by the same as the specimen stamp of the applicant in the bank (as a substitute for discounting application).

C. The original commodity trade or employment contract between bearer and drawer (prior holder), and copies of VAT invoice or common invoice issued according to relevant taxation regulations between discounting applicant and prior holder.

D. Immature valid commercial draft, issued according to The Law on Negotiable Instruments of the People's Republic of China and relevant laws and administrative regulations, with complete elements and an acceptance term of not more than six months.

Process

1. Applicant fills out discounting application of bank acceptance draft or discounting application of commercial acceptance draft and applies for discounting at any of the authorized branches of Bank of China with immature bank acceptance drafts or commercial bank acceptance drafts;

2. Examination of qualification of the applicant by the discounting bank;

3. Validation of the commercial drafts;

4. Verification of authenticity and validity of the drafts to be discounted and the transaction relationship by Bank of China according to regulated procedure;

5. The business contract signed between the applicant and the discounting bank;

6. Endorsement and disbursement based on the value of the drafts with the interest deducted.

Calculation of discounting interest:

Discounting interest = Face Value of the commercial draft ╳ Discounting Term ╳Yearly Discounting Interest rate/360

Present Value= Face Value of commercial draft - Discounting Interest.

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