By Ayo Emakhiomhe
This is continued from last post on bank loans as a mode of raising finance for small businesses.
Remember to click on "join this site" botton at the top of the blog page to be getting our posts directly to your email address.
Let’s look at some of these credits especially the ones that affect the small businesses in Nigeria.
INVOICE DISCOUNTING
This is available to customers with invoices or certificates that can be discounted for payments made to or to be received from acceptable third parties. In simple terms, if you have concluded a job for a client of yours who does not make payments immediately (maybe over 45-60 days) but you require cash to urgently conclude another job or simply for cash flow management, then you can present the invoice to the bank who will give you as much as seventy (70%) percent of the invoice sum (less charges) based on various terms and conditions.
CHEQUE DISCOUNTING
This is similar to invoice discounting except that in this case it’s a cheque that is issued and not an invoice. The bearer of the cheque who should be a customer of the bank offering this service will get an immediate value of all or part of the sum of the cheque (less charges) if the issuer of the cheque is an acceptable party to the bank.
The bearer can then have immediate cash for other purposes while the cheque goes through the normal clearing processes.
CONTRACT FINANCE
A bank might decide to finance a contract awarded to their customer either fully or partially based on the customer’s request. For the bank to be a party to such a contract, it must have considered the profitability and risks of such a contract and the integrity and capacity of the parties to the contract. There is no restriction to the type of contract (as long as it is within the gamut of the law, meaning that it is legal) a bank can finance once the customer meets with the terms and conditions of the bank. Note also that no terms and conditions are cast in stone; waivers can be gotten depending on the workings of the contract to be financed.
TO BE CONTINUED BY NEXT POST.
read a book today.
No comments:
Post a Comment