Special features of the discount credit due to the purchase of receivables



What is a discount loan?

What is a discount loan?

The three standard loans that German banks grant in most cases in Germany cover around 90 percent of customers’ credit needs. The three standard loans primarily refer to the overdraft facility, the installment loan and the real estate loan. However, these loans mainly cover the needs of private customers, while business customers often have somewhat more individual credit requirements. Therefore, in addition to these standard loans, there are other types of loan that are almost exclusively used by business customers of the bank. These special loans, some of which are rarely used in practice today, include so-called discount loans.

In short, the discount loan is a loan that is based on the purchase of a bill of exchange. In this context, one also speaks of a purchase of receivables because the change always includes a receivable from a debtor. In this case, the purchaser of the bill of exchange is a bank that in return provides the customer (the biller of the bill of exchange) with a loan. For example, the customer submits a change of over 5,000 dollars to his bank. Instead of having to wait until they can redeem the bill of exchange, which can sometimes take several weeks, the biller receives a loan from his bank. As a result, he can have the equivalent of the bill practically immediately. As a rule, such customers are given a so-called discount credit line, up to which they can repeatedly submit bills of exchange that are credited by the bank.

Is the bank willing to buy bills of exchange?

Is the bank willing to buy bills of exchange?

From the customer’s point of view, it should be noted with the discount credit that the full equivalent of the bill is not credited, but costs and interest (discount) are deducted on the part of the bank. In practice, however, the business with the purchase of exchange papers has drastically decreased in the past. The main reason is that the bills of exchange can no longer be sold to the Capital lender by the banks, which was also referred to as rediscounting. For this reason, only a few banks are even willing to buy bills of exchange from their customers and to grant a discount loan on this basis. Only the banks buy bills from time to time.