Cheque Discounting

This is similar to Local Bill Discounting except that these can be collection documents without an LC as well as International Bills. If you have been extending credit to your customers and because of which you are having working capital issues, there is a way to cash your future receivables from your customers. Let us say that you extend a credit facility of 60 to 90 days to your customers. Your customers are larger entities and they issue you a post-dated cheque or they accept your Bills of Exchange (BOE), banks will be able to discount these instrument.

Tenor of the facility: 30 to 90 days

Interest rate: 6% to 12% p.a

Processing fee: 1% to 2.0% onetime facility setup fee

Requirement:

12 month bank statement of Business account

Years in business: Minimum 3-5 years

Clear repayment history of any other loans

Business turnover of minimum AED  5-8 million per year

Profitability: Net profit to be positive for last 2 years

Audited financials (Balance Sheet) – 2 years