Bill of credit: description, terms, terms, features of repayment and reviews

With the development of the banking system, new settlement systems began to appear . One of them is a promissory note loan. This security is used not only as an investment tool that generates revenue, but also as a means of payment. In this article, it will be a question of the second function of a bill.

The Essence

Any organization inevitably faces the need to obtain borrowed funds for temporary use. With the development of credit relations, banks began to offer new types of loans. Bills - the product on the market is not new, but not sufficiently mastered by the participants. The transaction is based on a standard bank loan. But only money is not credited to the bank account, but is provided in the form of the Central Bank.

The enterprise applies to receive a bill of exchange loan. Procedure of registration of the transaction is standard: the organization is requested to establish the constituent documents and financial reports. After acceptance of the positive decision the contract of the bill credit consists. He almost completely copies the contents of the standard contract, except for one item. If the purpose of attracting a regular loan is to pay for raw materials, equipment, repayment of wage arrears, then in the case of a bill loan, the purpose of the transaction is the acquisition of a bank's debt securities. The contract of guarantee, as an additional guarantee, may not be concluded. After signing the papers for the organization open a loan account.

Process

During the use of the loan, the bank transfers the funds to the borrower's account. This amount is immediately written off for the purchase of a bill, if the contract states that the bank is entitled to a direct debit. Or the payer himself must provide a payment confirming the transfer of money. That is, the account is opened only for compliance with the requirements of the Central Bank. Use of funds not for their intended purpose will not work. Provisions are made by bank employees. The borrower is indicated on the bill as the first holder.

Within the framework of one contract several CBs may be issued. The total amount for all bills should be equal to the volume of the loan. Exceptions are cases where the contract provides for the collection of additional commissions.

Using

Usually a bill is purchased for settlements with suppliers. It is enough for the borrower to put a transfer inscription on a security to pay off the debt to its counterparty. The bill has a new owner. The security is put into circulation. But this borrower should not worry. Despite the specifics of the transaction, a bill of exchange is repaid in cash. The deadline for the calculations is indicated in the contract. Usually it does not exceed 6 months.

The term of payment of a bill may exceed the maturity of the loan for a maximum of two weeks. This circumstance must be taken into account in the calculations. If a bill ahead of schedule is presented for payment, then it will be repaid not at par, but at a discount. This will also affect the price at which the mutual settlement between the borrower and the lender will be carried out.

Example 1

The borrower received a promissory note worth 1 million rubles. The amount of its obligations to the bank is 4.7 million rubles. The maturity date is March 15, 1616. The final date for mutual settlements between the borrower and the creditor is set for September 28, 1515. At the time of application to the bank, the creditor learns that the institution on September 28, 15 canceled the bill with a discount of 11%. The bearer received not 1 million rubles, but 890 thousand rubles. For the same amount, the borrower's obligations are reduced: 4.7 - 0.89 = 3.81 million rubles.

Similar calculations are made throughout the chain of owners. The closer the term of mutual settlements, the larger the amount will be taken into account.

Conditions

Bills of credit carry three types of risks: borrowed, interest and threat of liquidity reduction. To reduce them, financial institutions make demands on customers:

• Provide collateral (security) in the form of state loan bonds (other liquid securities), commodity stocks, real estate, equipment;
• To carry out activities at the time of signing the agreement for more than a year;
• Have regular cash flow on the accounts.

When these minimum requirements are met, bank loans are issued for up to one year at 6-10%.

Benefits

• The bill of credit is cheaper than a normal loan. Although the procedures for registration of transactions are identical, the rate for such loans usually does not exceed 10%.
• The loan allows you to make payments even if there are unpaid invoices for the account.
• The very fact of debt repayment is formalized by a transfer inscription on the document. This greatly reduces the workflow.

disadvantages

• Reduction of the amount accepted for offset, due to the redemption of a bill with a discount.
• The need to coordinate with the supplier the possibility of paying off the debt with a promissory note and the terms of the transaction, i.е. With what extra charge he will take the CB to offset.

Accounting for promissory notes

Debt securities are accepted for accounting by the supplier as part of financial investments (item 58-2). Depending on the period for which the bill is issued, the borrower in the balance sheet reflects the posting of the Central Bank on the DT accounts 66-2 (short-term) or 67-2 (long-term bank loans). Amounts to be paid for debt are written off in DT 91-2 "Other expenses".

Example 2

ZAO received a short-term promissory note loan from the bank for 500 thousand rubles. For a period of six months at 5.5% per annum. Interest payments are made in equal installments together with repayment of the principal part of the debt: 500 * 0.055 = 13.75 thousand rubles. This amount is reflected in the accounting records by posting DT91-2 KT 66-2.

Taxation

In Art. 167 TC says that when transferring a bill to pay off the supplier's VAT debts, it is necessary to calculate VAT only if this CB is paid or transferred by the taxpayer under an endorsement. Receipt of a bill by a third person is considered an exercise, as the buyer's obligation to the organization is terminated without reservation.

Example 3

The buyer of the LLC paid for the goods with ZAO promissory note purchased in the Sberbank office. The seller carried out the shipment of goods in the amount of 18 thousand rubles. (VAT of 10%). The buyer transferred the bill to the same amount. From a legal point of view, LLC has fulfilled its obligation to pay for goods. ZAO can not reflect this security on accounts receivable accounts.

Sberbank is not a debtor of the seller. In this case, the discounted promissory note should be reflected on account 58 in the amount of the cost of its purchase, that is, the value of the shipped products. In the BU, the seller makes the following entries:

DT62 KT90-1 "Revenues" - 18 thousand rubles. - reflects the sale of goods to the LLC.

DT90-3 "VAT" KT68-3 - 1,636 thousand rubles. - VAT accrued.

ДТ58-2 «Debt securities» КТ76-3 «Settlements on other incomes» - 18 thousand rbl. - Bill accepted .

DT76-3 KT 62 - 18 thousand rubles. - the bill paid for shipped products.

Features

The bill repayment of the loan provides that VAT for purchased goods is calculated on the basis of the book value of the Central Bank. The balance also takes into account the cost of buying a bill. The actual amount of expenses may not coincide with the nominal value. If it is more than the balance sheet, VAT is deducted on the basis of the seller's accounts.

Movement of a bill

There are two basic schemes for the movement of bills. Let us consider them in more detail.

After the buyer and supplier agree on the amount of the transaction, the terms of payment, counterparties open accounts in one bank located in the same city and enter into a tripartite agreement. The buyer acquires a short-term bill for the amount of the transaction, places it on a deposit and blocks it. Upon completion of the transaction, the pledge is withdrawn, and the funds are transferred to the supplier's account. If violations were detected during the transaction, then after the unlocking, the bill remains with the buyer. The security can not be withdrawn from collateral without the consent of both parties. So the buyer is insured against writing off the funds before the due date, and the supplier - from non-payment of the transaction after its completion.

Let us change the conditions of the previous scheme. Counterparties open accounts in branches of one bank in different cities. The buyer prepares long-term bills for the amount of the transaction, notifies the supplier in writing and gives permission to transfer a part of the received securities to the depo account. The supplier's bank contacts the buyer's credit institution to confirm that the bills are blocked. Upon completion of the transaction, the security is unlocked and transferred to the supplier's account.