A “time draft” is pretty much a delayed payment that’s guaranteed by a financial institution. It’s used mostly in the international trade arena, and the gist of it is that we don’t have to pay for goods we import the instant we receive them. This is beneficial because it can lower the risk level of doing business with potentially unknown foreign entities; we have a chance to receive our order and make sure it’s good to go before we pay for it.
For example, let’s say our company, Chihuahuanderful, makes high-end clothing for small dogs. We’ve decided to introduce a sleepwear line, and we want to import some French silk to make fine puppy pajamas. We find a supplier who’ll sell us what we need at a fair price, but we’re a little wary since we’ve never done business with them before.
Enter the time draft. We go to the bank and apply for a banker’s acceptance, which basically guarantees payment to the French silk place on the bank’s credit. Then the company ships us the silk, and the bank ships them the acceptance, which they can either cash immediately or hold onto until it matures. 30 days later (it’s not always 30 days, FYI), our post-dated payment to the bank for the acceptance is taken out of our account. This gives us time to look over the silk and make sure it’s up to snuff before we shell out beaucoup bucks to some company we don’t know, and it gives the exporter some peace of mind as well, since they know they’re going to get paid.
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Finance: What is overdraft protection?0 Views
and finance Allah shmoop What is overdraft protection When it's
super windy You wear a heavy parka Or maybe when
your country's at war and you're worried about being conscripted
into the Army you pretend to have a highly contagious
venereal disease Yeah that's overdraft Not so much So what
is a draft Financially speaking it's a signature on a
cheque or some other financing A piece of paper which
draws money from one bank account making it payable to
someone else's bank account Technically bill payers quote draw money
unquote And the old timey English way of saying that
was that They drafted money and the phrase literally came
from the beer or need to pouring bartender who would
draft you no or draw another point So in the
banking world you can only draw draft up to the
amount of beer that you have available to pour Nothing
Maur If you try to overdraw that amount nothing happens
beyond the sound of air Far king gently out of
the tap head of the beer thing because the draft
is a promise to pay Hey when trans actors don't
do this properly and they draft or draw more money
than they have available to pay in their account than
the event is tantamount to a broken promise to pay
or a beer fart So it's really a big deal
And most bank account holders are happy to have a
kind of insurance embedded in their account that protects them
from this 15 yard penalty harming their credit rating And
a bad credit rating will usually ends up meaning that
they pay a lot more when they try to win
a home mortgage or get a car loan or a
credit card So the pain here is felt An overdraft
protection works now more or less like a financial condom
Just keep your fingers crossed It's at least 97% effective 00:01:38.44 --> [endTime] Oh
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