Commercial draft refers to the instrument issued by the drawer to entrust the payer to pay a certain amount of money to the payee or the bearer on a selected day. The seller draws up a draft – which is a sort of combination check and a promissory note – calling for the buyer to pay a specific amount of the seller by a specified date. This draft is then sent to the buyer’s bank, along with the shipping invoices necessary to take possession of the goods. Simply it is called – Demand for payment. It is a request or demand for payment made by a bank on behalf of a third party.
The commercial draft consists of bank acceptance draft and trade acceptance draft. The period of presentment for payment is as long as six months.
Commercial drafts can be classified into two types: bank acceptance draft and commercial acceptance draft.
(1) Bank Acceptance Draft
Product Definition – The commercial drafts to be accepted by a bank are bank acceptance drafts.
Product Features – Compared with commercial acceptance drafts, the bank acceptance drafts boast more reliable credit guarantee of banks.
Application Procedures – When having actual transactions or getting involved in an actual debtor-creditor relationship with other organizations, any customer opening a deposit account with the Bank that boasts good settlement standing and credit standing.
(2) Commercial Acceptance Draft
Product Definition – The commercial drafts to be accepted by the payer other than a bank are commercial acceptance drafts.
Product Features – The drawer of a commercial acceptance draft can either be the payee or the payer and the payer is the acceptor.
Application Procedures – Any customer opening a deposit account with the Bank can use commercial drafts when it has actual transactions.