BILL

DISCOUNTING
KNOWLEDGE
SERIES
What is Bill Discounting
Bill Discounting is an option which allows a business to get quick payment for their work and meet their operating
expenses without having to depend on any external agency to provide funds.
It is a trade-related activity in which a company sells its outstanding Invoices to a financier (a bank or another
financial institution) that agrees to pay the company for them at a future date.
BILL DISCOUNTING PROCESS
The step-by-step process of bill discounting is given below:
◦ A seller supplies goods or services to a buyer and raises an invoice.
◦ The buyer accepts the invoice. This approval means the buyer acknowledges the invoice and promises to make the
payment on the due date.
◦ The seller approaches the financial institution to get the bill discounted.
◦ The financial institute verifies the creditworthiness of the buyer and the legitimacy of the bill.
◦ Once approved, the bank disburses the funds to the seller after deducting the pre-defined fee, discount, or appropriate
margin.
◦ Thus, the seller gets a quicker payment for the invoice, which can be used for other business purposes.
◦ At the end of the original credit period, the buyer makes the payment to the financial institution.
BILL DISCOUNTING RATE OF
INTEREST
◦ Most banks and NBFCs do not have a fixed interest rate for discounting bills. Any financial institution considers
several factors before deciding on the discount, which may vary from customer to customer.
◦ The various factors that go into consideration for deciding the discounting rate are:
◦ Financial history and credit score of the seller
◦ Years of being in the business
◦ Business volume
◦ Credit-worthiness of the buyer
◦ Stability of the business and industry
ELIGIBILITY CRITERIA
The eligibility criteria for bill discounting varies from lender to lender and is generally decided by the management of
the respective financial institution offering the service. However, the most common criteria for bill discounting are listed
below:
◦ The company should have been in business for a reasonable period of time. Most financial institutions ask for a
minimum of 3 years of being in the business.
◦ The seller should be dealing with good Companies.
◦ The credit score must be a minimum of 650 or above.
◦ The business must have a minimum turnover of 1 Crore.
FACTORS THAT AFFECT THE
ELIGIBILITY
In addition to the criteria mentioned above, some general guidelines that affect the eligibility for bill discounting
are listed below:
◦ Number of years in the business
◦ Nature or type of business
◦ Business Volume and Annual Turnover
◦ Financial Stability of the seller
◦ Repayment history and capability of the buyer
◦ Business Positive Net worth or Profitability
◦ Credit rating of a business
◦ Previous loan defaults, if any
CONTACT DETAIL
◦ For More Detail Regarding Bill Discounting or Any other Loan ,Call us or whattsapp us @ 8368032788