A bill of exchange requesting the bank to pay the face amount at a future date is a
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A bill of exchange requesting payment of face amount to the bank on exchange date is a time draft
What is 'Time Draft'
A one-time draft is a form of payment which is guaranteed by the issuing bank, but after receiving and accepting it, it is not fully payable till the time specified. Time Draft is a type of short-term credit used to finance the transaction of goods in international trade. They allow the buyer to delay the payment after accepting the shipment of the exported goods. One time draft is a paradox with a sight draft, for which instant payment is required.
Below 'Time Draft'
The purpose of the draft of time is to facilitate international trade. When an exporter receives an order from an unknown importer (or with whom it has a credit history) in another country, then the importer can apply for the approval of the banker, which replaces the bank's credit for the importer's credit. is. Time drafts are post-dated so that the importer does not have the payment till the specified date to receive the goods ordering and confirming satisfaction. After issuing the acceptance of the banker, the exporter now has the promise of payment from the financial institution. It can hold this property until maturity and can be fully paid, or to get pre-access to the money, it can sell it before the maturity on the rebate. The time amid acceptance and maturity is known "tenant" or "use". Thus, time drafts can be known as "use drafts".
Time draft illustration
Suppose the manufacturer of high-tech hardware located in Texas requires components from electricity suppliers in Taiwan. This Taiwan company has never visited this U.S. The manufacturer has not done business with. In order to complete the transaction, Importer in Texas offers a large global bank with a branch office in Taipei, Taiwan, with a one-time draft (with a two-month post-date for payment), after which it accepts it Thus, officially creates the banker's approval. In Taiwan, the exporter sends the order of electrical components and decides to capture the acceptance of the banker until maturity instead of selling it at the discount before maturity.