Commercial bill (also known as a bill of exchange) – a form of commercial loan on an interest-only basis, or a principal and interest basis. Commercial bills typically require some sort of security.
Commercial Bills can be an excellent answer when you need a significant injection of cash above $100,000. Normal terms are from 1- 6 months for variable rate facilities and from 1-5 years for fixed-rate facilities.
With fixed rate facilities, your interest rate remains constant for the term of each drawing, which may include several rollovers. With variable rate facilities, the interest rate is fixed for each bill but will vary at each rollover.
Your commitment is to repay the face value of each bill. If you roll the bill, you pay the difference between the face value and the discount amount of the new bill.
Borrowing via a commercial bill facility offers the flexibility to:
- adjust the principal amount borrowed each rollover (or interest payment period) in line with business cash-flow requirements
- manage the associated interest rate risk with tailoring
Bank Bill facilities are generally provided for a set term. The term of the Bill will be renegotiated by drawing a fresh Bank Bill for an agreed number of days at each rollover.
Tier One Banks usually provide four facility options that offer a range of strategies for managing interest rate risk. This range includes:
- Floating-Rate Bills
- Fixed-Rate Bills
- Capped Rate Bills
- Collared Rate Bills
So when you are considering what loan you need for commercial purposes, you should consider the Commercial Bill. Diamond Finance understands that these Bank off-balance derivative lending products are very complex, but, simple is not always cost-effective for the savvy business looking for a financial edge. Our brokers can help you!