Acceptance Financing
A CRITICAL KEY TO THE CURRENCY
What is Acceptance Financing?
Acceptance Financing Definition
At Order of Merchants, we define Acceptance Financing as a series of events whereby a drawee accepts a draft, recognizes both the asset and liability represented by said draft, and utilizes the asset in some way to enable the settlement of the liability. Also known as Acceptance Credit.
Acceptance Financing Definition
At Order of Merchants, we define Acceptance Financing as a series of events whereby a drawee accepts a draft, recognizes both the asset and liability represented by said draft, and utilizes the asset in some way to enable the settlement of the liability. Also known as Acceptance Credit.
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What is a Draft?
Draft Definition § 3-104(e) A Draft is an order, a written instruction to pay money signed by the person giving the instruction. Also an Instrument. Learn More. |
What is a Drawee?
Drawee Definition § 3-103(a)(4) A Drawee is a person ordered in a draft to make payment. |
What is Acceptance?
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Acceptance Definition
§ 3-409(a) Acceptance means the drawee's signed agreement to pay a draft as presented. It must be written on the draft and may consist of the drawee's signature alone. Acceptance may be made at any time and becomes effective when notification pursuant to instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person. |
More on Acceptance
§ 3-409(b) and (c)
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Acceptor Definition
§ 3-103(a)(1)
§ 3-103(a)(1)
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An Acceptor is a Drawee who has accepted a draft.
Acceptance Definition (Investopedia) A contractual agreement on a time draft or sight draft to pay the amount due at a specified date. The party who is expected to pay the draft writes "accepted", or similar wording indicating acceptance, next to his or her signature along with the date. This person then becomes the acceptor, and is obligated to make the payment by the maturity date. An acceptance agreement strengthens a time draft by putting the acceptor under contractual obligation to pay. |
Certified Check Definition
§ 3-409(d) A Certified Check is a check accepted by the bank on which it is drawn. Acceptance may be made as stated in subsection (a) or by a writing on the check which indicates that the check is certified. The drawee of a check has no obligation to certify the check, and refusal to certify is not dishonor of the check. |
Types of Acceptance
From our research we have found two different forms of Acceptance that are used today, though the benefits of such have not been made known to the general public. The two forms of Acceptance are Trade Acceptances and Bankers' Acceptances.
From our research we have found two different forms of Acceptance that are used today, though the benefits of such have not been made known to the general public. The two forms of Acceptance are Trade Acceptances and Bankers' Acceptances.
What is a Trade Acceptance?
Trade Acceptance Definition
Trade Acceptance Definition
It is simply an acknowledgement of a debt and its execution reflects credit upon the buyer as well as the seller and is the evidence of a well-organized, carefully managed business. - Robert H. Bean, Executive Secretary American Acceptance Council. In a trade acceptance, the buyer is the acceptor.
Books on Trade Acceptances
What is a Bankers' Acceptance?
Banker's Acceptance Definition
Banker's Acceptance Definition
A Bankers' Acceptance is a "short-term debt instrument issued by a company that is guaranteed by a commercial bank." A bankers' acceptance is a time draft honored by a bank, and is typically used in international trade. International Trade is facilitated by banks enacting bankers' acceptances, thereby guaranteeing the payment for goods.
Books on Bankers' Acceptances
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PAUL WARBURG AND HIS PROMOTION OF THE USE OF TRADE ACCEPTANCES
Paul M. Warburg, chairman of the Executive Committee of the American Acceptance Council, made the following statement of principles relative to trade acceptances at the first meeting of the Executive Committee of the Council on April 14th, 1919: "We are preaching the gospel of the trade acceptance for no other purpose than that we believe its use makes for sounder business and banking conditions. We do not say that single name paper is not good, or illiquid; but we may fairly say that the trade acceptance is better and more liquid. We do not say that the trade acceptance serves all purposes and that all cash sales and all cash discounts ought to be avoided ; but we do say that where business is not done on a strictly cash basis, the trade acceptance will be found the safer, sounder, and in the long- run, more economical method than the open accounts. Indeed we believe that it is so much of an improvement over the open account that in some cases sellers, at present sacrificing a very heavy cash discount for the purpose of avoiding the dangers and inconveniences of open accounts, might find it to their advantage to consider the economy involved in the use of the trade acceptance when dealing with customers of strong credit. We do not want to appear as wishing to force upon anybody the adoption of the trade acceptance, unless he considers it as serving his better interest. We do wish, however, those who can profit from the method to study it carefully and not to hesitate to adopt it. The American Acceptance Council's interest in the matter is that whatever makes for better morals in business and for better credit and banking conditions is a decided benefit to the United States." |
Paul Warburg is a member of the Warburg Banking Family.
Many of his contemporaties regarded him as the chief driving force behind the establishment of America's central bank. Harold Kellock wrote, "Five years from the time Mr. Warburg had begun his single-handed crusade, his ideas were placed before Congress in the form of the Aldrich Bill." The Aldrich Bill was the precursor to the Owen-Glass Bill which later became the Federal Reserve Act. In 1919, he founded and became first chairman of the American Acceptance Council. - Wiki more |
WHAT DOES THE FEDERAL RESERVE ACT STATE ABOUT ACCEPTANCES?
Excerpt I from POWERS OF FEDERAL RESERVE BANKS
"Any Federal reserve bank may discount acceptances which are based on the importation or exportation of goods and which have a maturity at time of discount of not more than three months, and indorsed by at least one member bank. The amount of acceptances so discounted shall at no time exceed one-half the paid-up capital stock and surplus of the bank for which the rediscounts are made.
The aggregate of such notes and bills bearing the signature or indorsement of any one person, company, firm, or corporation rediscounted for anyone bank shall at no time exceed ten per centum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values.
Any member bank may accept drafts or bills of exchange drawn upon it and growing out of transactions involving the importation or exportation of goods having not more than six months sight to run; but no bank shall accept such bills to an amount equal at any time in the aggregate to more than one-half its paid-up capital stock and surplus." - Sec. 13 Excerpt Federal Reserve Act
Excerpt II from OPEN-MARKET OPERATIONS"Any Federal reserve bank may, under rules and regulations prescribed by the Federal Reserve Board, purchase and sell in the open market, at home or abroad, either from or to domestic or foreign banks, firms, corporations, or individuals, cable transfers and bankers' acceptances and bills of exchange of the kinds and maturities by this Act made eligible for rediscount, with or without the indorsement of a member bank." - Sec. 14 Excerpt Federal Reserve Act
QUOTES FROM: MODERN BANKING; COMMERCIAL & CREDIT PAPER REGARDING ACCEPTANCE
"It is simply an acknowledgment of a debt and its execution reflects credit upon the buyer as well as the seller and is the evidence of a well-organized, carefully managed business."
"It is simply an acknowledgment of a debt and its execution reflects credit upon the buyer as well as the seller and is the evidence of a well-organized, carefully managed business."
