Bill of Exchange

There are many different ways for businesses to obtain money aside from the basic business loan.  One of these is called a bill of exchange.  A bill of exchange is basically a type of a check or a promissory note that does not usually accrue interest (unlike a loan), although some do.  If it does have any form of accrued interest, this is usually tabulated into the entire amount at the time of issue.  The bill of exchange is an order by one person to pay another person or business a specific amount of money.  That amount is to be paid on a certain date as listed on the actual bill of exchange.  This form of monetary exchange can either be offered by a bank or by a third party.  Typically when it is drawn on a bank it is called a bank draft.  If the money is drawn on any other party other than a bank, it is called a bill of exchange.  Essentially the term draft means that it is a deferred payment arrangement.  The agreement is completed, but the money cannot be withdrawn until a set date.

If as a business owner you opt to go for a bill of exchange instead of a loan, you’ll want to be sure that everything is fully documented and signed.  That way, if something does happen to come up later, all of your bases are covered.  Keep dated and signed copies of everything for your records, and hold them until all debts or amounts are fully repaid.  In addition you may also want to get a signed document showing everything has been repaid for your records as well.  Know your rights and how a bill of exchange works, and you may find that as a business owner, this is the better option for you to use instead of a small business loan.