Acceptance may also be referred to as banker’s acceptance, or BA. A BA is basically a time draft which indicates the bank’s acceptance of the drawee’s request for a particular amount of money for release at a specified time in the future. It may be paid after a period of six months or so, and functions similarly to a postdated check.

Once the endorsement has been made by the bank, it is considered accepted. Once the bank signs the agreement, the BA may be used as a trading instrument. The holder of the BA can make use of it for trading purposes, especially if the bank is one of good repute. After all, BAs also function in such a way as to allow a trader to take advantage of his bank’s credit rating instead of relying on his own score.

A time draft is a financial instrument which specifies a future payment date. This also includes a set of provisions under which the arrangement will take place.

BAs are used quite often in international trade. They may come in particularly handy in cases where two partners are conducting business for the first time, and the partner needs to get some assurance regarding the financial stability or credit worthiness of a trader.

A business owner may, for example, request his bank to finance him by way of a BA if he is not certain that his prospective business partner will agree to finance him. Bankers’ acceptance rates determine the rates at which BAs are traded. When being traded, BAs usually sell for a lower price than the value cited in the document, therefore allowing the new owner to earn some profit once the payment is issued by the bank.

Leave a response

Leave a Response