Besides, Trust Receipt Facility, we can also avail ourselves with another form of trade financing facility which is called Bankers’ Acceptance Facility or in short called B/A facility.

Vide this Bankers’ Acceptance facility, the bank can finance us for imports of goods. Simply, it is a form of trade financing facility where we the buyer/importer customer (drawer) will use a Bankers’ Acceptance to draw on the financing bank (drawee) for a certain fixed period (tenor or issuance) which is duly accepted by the same financing bank (acceptor).

Also, this facility also permits us to discount our current invoices of our customers to the bank for a certain fixed period.

Please note that this fixed period granted by the banker should coincide with our normal business operating cycle.

Incidentally, this Bankers’ Acceptance was introduced in Malaysia in 1979 and the terms and conditions are as follows:

• Tenor : not less than 30 days or more than 200 days from the date of acceptance
• Amount : rounded up downwards in multiples of Rm1,000
• Minimum : not less than Rm30,000
• Applicable: imports, exports, sales and purchases within Malaysia
• Payee: payable to the order of the drawer

The normal procedure to drawn on this facility is as follows:

• For import of goods,upon arrival of the shipping documents, we applies for a Bankers’ Acceptance. Next, we draw a Bill Of Exchange on the financing bank and sign the declaration and other documentary requirements;

• The financing bank accepts the Bill of Exchange and then releases the shipping documents to us/buyer/importer customer after due payment of the commission and discount charges at the agreed rates.

• The process for using the bankers acceptance facility to finance our customers invoices are the same as for import of goods. The difference is to use our current month invoices and the process flow is almost similar.

The formula charged by the bank is as follows:

Market price or discounted proceeds =

Face value/maturing value(365) /(365)+(Days to maturity) (Discount Rate)

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Related Entries

• Finance: Trust Receipt Facility
• Short Term Financing-Bank Overdraft Facility
• Short Term Financing:Inventory Financing (Part 2)
• Short Term Finance: Taking Cash Discount From Supplier
• Note Issuance Facility (NIF)