Bill Purchase and Bill Discounting Facility

When a Sale and Purchase Transaction takes place, the seller issues an Invoice (Bill) to the Purchaser.

  • If this Sale is a Credit Sales, then the seller will get the money from the purchaser only after the expiry of credit period.
  • If the seller does not have extra money, during the period between credit sales and realization of money from debtor, he will not be able to buy more goods and sell again at a profit.
  • To facilitate the business of manufacture, trade etc, banks help you by giving financial resources in the form of Bill Discounting Facility and the bank’s bill finance product helps you bridge the fund gap between the date of sale of products to the receipt of payments.
  • The bank purchases the bill of exchange your company receives against a product sale, at a discount, thus doing away with the delay in realizing the receivables.
  • The extent of discounting would amount to the interest calculated till the payments for the original sale are realized, and will be determined on the basis of market interest rates as well as the credit rating of the borrower.
  • So, don’t keep the funds blocked during the credit period but get them discounted and increase your sales turnover.
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