It is very important for a novice financier or trader to understand the abundance of professional terms. The securities market is especially rich in mysterious concepts. What is, for example, an advised bill of exchange? How is it different from the usual one?
Bill of exchange as a promissory note
A bill of exchange is a security in which an obligation is expressed to pay a certain amount of money to a person at a specific time and place. In fact, a bill of exchange is a debt obligation of an abstract type, since it does not depend on any conditions.
Being a money document, a bill of exchange has a set of certain details, the aggregate of which is called the form of a bill. If the security is not properly framed, the form of the bill is considered defective. Such a document loses its validity, and the obligation expressed in a bill of exchange is lost.
A bill of exchange can be simple and transferable. There are also discount and interest-bearing securities of this type.
The bill has advantages over some other financial instruments, for example, over a deposit. One of its advantages is a lower taxation rate for income from promissory notes. A bill of exchange differs from a savings certificate in higher liquidity. This makes such a security a profitable fundraising tool.
It should be remembered that a bill of exchange is a special type of securities. It is quite possible to use it as a means of payment. Today, transactions with settlement bills are very popular among industrial enterprises and financial institutions.
Prepaid bill
A special place among securities is occupied by the so-called avalanche bill. Aval is a bank guarantee in the form of a signature affixed on the front of a document. Sometimes the signature is placed on a separate sheet attached to the bill of exchange.
What is the advantage of this type of bill? The point is that aval increases the security of a security. This signature guarantees the unconditional and unconditional payment of the obligation. Most often, a banking institution becomes an avist. Avalist assumes full responsibility to the holder of the security. He undertakes to fulfill the obligations specified in the bill.
After paying the obligation, the avalist receives all the rights that directly follow from the form of the security.
Avaluation of promissory notes is often used by banks when registering a monetary debt for services and goods provided, as well as for work performed. In this case, the aval can be provided not only for the entire amount of the bill, but also for its part. Some banks provide an aval at different stages of a bill of exchange registration, for example, when it is drawn up, issued or at the stage of circulation of this security.
