the Concept of a paper credit of Russia
the Bill is a security which confirms obligations of the debtor to pay a certain amount to the creditor later in advance stipulated period after its presentation.
Diagram of receiving paper credit:
1) the Organization addresses to bank behind receiving a paper credit - the enterprise and bank sign the contract under which the bank issues to the enterprise the bill, and the enterprise in turn undertakes to return at the scheduled time the credit obtained on the bill in a cash equivalent together with percent.
2) the Enterprise can transfer the bill to other enterprises to which the firm shall, in the form of payment of the debts, for example, for goods or raw materials – transmission is made under the gear act or by plotting on the bill of special record (endorsement). It is possible to change the bill holder without restrictions.
3) the Last bill holder shows the bill in bank on time and receives the payment on the bill making its nominal.
4) the Enterprise which received the bill from bank has an opportunity to pay off the creditor enterprises, without having money on the settlement account. It will be simpler to pay off bank on a paper credit to the enterprise as the validity of the bill can be extended (normally, the bill is issued for a period of 6 months till 1 year). Besides, the paper credit can be repaid one amount at the end of period, and it is possible to make cancellations monthly.
Advantage of bank in case of bill crediting:
2) is highly liquid support on banking activities;
3) has rather low interest that allows bank to attract additional clients.
to all contractors that causes their popularity in practice.
Design of a paper creditwith
In case of the inference of a paper credit with bank the same rules work, as in case of normal crediting. The enterprise needs to provide together with the application in bank financial statements, copies of constituent documents, identity cards of principals. Besides, on a paper credit as support the pledge can be required therefore the enterprise shall have a liquid property suitable for these purposes.
If the financial statements of the enterprise withstand credit analysis of bank, the bank will make sure that the enterprise will be able to repay in due time the debt on the credit and that it is solvent, then the decision will be the positive. After signing of the loan agreement the required paper credit will be issued to the enterprise.