Bill discounting is a form of company financing, according to which the bank will purchase bills from their owner (bill holder) before maturity by the bill holder (the time of repurchase by the bill holder matures) with a discount equal to loan interest rate.

Types of Bill Discounting

• Standard discounting is a purchase by the bank of a bill from a bill holder before the maturity with a discount, at which the payment of the bill is made by a bill drawer
• Discounting REPO is a purchase by the bank of a bill from a bill holder before the due date with a discount, at which the bill holder undertakes to repurchase the specified bill from the bank before the due date.

Standard discounting

Advantages for a Bill Holder (Supplier):

• Liquidity management - the ability to sell to a bank the bills on every day before the due date
• Receivables decrease
• Absence of any liabilities towards the bank
• Increase of sales by attracting new customers who need a deferred payment for the goods

Advantages of use for a Bill Drawer (Buyer):

• Obtain a product without using working capital
• No monthly fees and commissions
• Deferment of payment up to 12 months
• The received goods may be pledges as collateral to the bank

Transaction background:

Entering into a contract of purchase and sale of goods between the Bill Drawer and the Bill Holder, under which the settlement by means of a bill is stipulated (requirement of the law)

Discounting REPO

Benefits for a Bill Holder (Supplier):

• Liquidity management - the ability to sell to a bank the bills on every day before the due date
• Increase of sales by attracting new customers who need a deferred payment for the goods

Benefits of use for a Bill Drawer (Buyer):

• Obtain a product without using working capital
• Deferment of payment up to 12 months

Transaction background:

Entering into a contract of purchase and sale of goods between the Bill Drawer and the Bill Holder, under which the settlement by means of a bill is stipulated (requirement of the law)