How To - Use a Commercial Bill



These are also known as bank bills and are securities issued on the money market. They are very attractive to investors because when a bank has added its name as an acceptor of that bill it becomes, in effect, a guarantee issued by the bank. They are generally used for short-term and long-term finance needs and the amounts can vary from $50,000 and up.

They are usually taken out for a particular term and at the end of the term, some bills can be extended, which is known as a “roll over”.

You don’t pay interest on the bills because they are discounted on the market. That is, the amount you actually receive from the bill is less than its face value so that the difference is the interest portion. You only get the discounted amount so therefore you will have paid the interest up front. If you decide to roll over the bill, then a different interest rate may be applied based on the rate at the time.

Bills like this can be put in place and remain for years, with the original limit that was accepted, staying in effect. It’s like having a long-term loan in place, able to be called on as required and the principal is repaid eventually on maturity.

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