Bill discounting is somewhat similar to accounts receivable, but the form and cost are different. After getting the bill, you can find a company HE Tuber or bank to exchange it into money. The bill here can be a bank acceptance bill or a commercial acceptance bill, depending on the issuing party. Is it a bank or a business.

Suppose there is a supplier now that sells a batch of goods to China Railway with a total value of 1 million yuan. In order to delay payment, China Railway issued a bank acceptance draft due in six months to Company A.

Now, because the supplier needs funds to purchase raw materials, he decides not to wait for the bill of exchange to mature, but instead chooses to discount the bill to obtain cash.

Submit a bill of exchange: The supplier takes this bill of exchange with a face value of 1 million yuan and due in six months to the bank for discounting.

Calculate the discount rate: The bank decides to charge an annual discount rate of 7% for this bill of exchange. Because the remaining term of the bill of exchange is six months, the actual discount interest is 1 million yuan × 7% × 0.5 (half a year) = 35,000 yuan.

Obtain cash: After the bank deducts a fee of 35,000 yuan, the cash paid to Company A is 1 million yuan – 35,000 yuan = 965,000 yuan.

The bill of exchange expires: Six months later, the bill of exchange expires, and the bank collects the full amount of 1 million yuan from China Railway.

Through bill discounting, the supplier obtained the required cash of 965,000 yuan before the bill of exchange expired, solving its short-term funding needs.

The bank received interest income of 35,000 yuan.

China Railway paid 1 million yuan when the bill of exchange expired, reducing procurement risks.

Why do we need to refinance? For financial platforms, it is to get cash quickly;

To put it more deeply, it is also to increase the rate of return (see "One article to understand financial factoring business and capital flow" for details - how to generate 2 times, 3 times or even higher returns with 10 million for you);

For financial platforms, assets that can be exchanged for cash include "accounts receivable" and bills. At this time, in addition to using the above financing models, there are also some new refinancing models to obtain cash.

1. Refactoring

After the factoring business is done, the factoring company obtains "accounts receivable". In addition to ABS, this asset can also be obtained from other factoring companies to obtain funds.

For example, a supplier provided materials worth 10 million yuan to China Railway Corporation and received a 360-day accounts receivable issued by China Railway Corporation.

The supplier signs a factoring contract with Factor A: In order to obtain funds in advance, the supplier chooses to sell this 10 million yuan of accounts receivable to Factor A, and Factor A agrees to pay this batch of accounts receivable. 90%, or 9 million yuan.

Funds flow to the supplier: The supplier receives 9 million yuan from factor A.

2) Refactoring process

Factor A and Factor B sign a refactoring contract: In order to obtain liquidity, Factor A chooses to sell this account receivable to another Factor B; Factor B agrees to pay 80 % of the payment, that is, 8 million yuan.

Funds flow to Factor A: Factor A receives 8 million yuan from Factor B.

Accounts receivable due

360 days later, China Railway Corporation paid 10 million yuan in accounts receivable to factor B.

Settlement difference

Factor A: Received a settlement of 2 million yuan from Factor B, and gave the supplier the settlement difference of 1 million yuan, earning an intermediate interest difference of 500,000 yuan.

Factor B: Received 10 million yuan from China Railway Corporation, settled the difference of 2 million yuan to Factor A, and earned 400,000 yuan in interest.

3) Results

Supplier: Obtain instant funds of 9 million yuan through preliminary factoring, receive all 10 million yuan of income upon maturity, and quickly withdraw funds.

Factor A: Raise 8 million yuan from Factor B through refactoring and earn an intermediate interest difference of 500,000 yuan.

Factor B: Provides funds to Factor A and earns 400,000 yuan in interest.

2. Accounts receivable ABS

Suppose this is still the factoring company. After doing factoring business, it has accumulated a large amount of "accounts receivable" assets.

Factoring companies can refinance several assets, but when they have a large number of "accounts receivable", they will consider packaging these "accounts receivable" for sale in the securities market, called accounts receivable ABS, to obtain Bigger gains.

(Of course, more complex market risks and regulatory requirements are involved here, but it can provide larger financing scale.)

Packaging accounts receivable to create ABS: The factoring company brings together its accounts receivable worth 10 million yuan and packages them to form a financial product that can be traded.

Issuing and selling ABS: Factoring companies issue these ABS through special plans SPV, assuming the issuance value is 9 million yuan, to attract investors (such as investment funds, insurance companies, other enterprises, etc.) to purchase these securities.

(Since each asset has a different maturity date, general assets also involve recurring purchases after maturity. This article mainly introduces the basic financing model and will not expand on it for the time being.)

Fund flow to factoring companies: Factoring companies actually received 9 million yuan from the issuance of ABS, taking into account various fees. These funds can be used for the company's daily operations and capital needs.

Collecting accounts receivable: When the accounts receivable expire (for example, after 90 days or 180 days) the debtor (such as China Railway) pays the SPV the receivables, totaling 10 million yuan.

Investors get returns: After receiving a payment of 10 million yuan from the debtor, the SPV uses these funds to pay corresponding interest to investors. Assuming that the annual interest rate is 5% and the investment period is half a year, the interest is approximately 225,000 yuan (9 million yuan * 5% * 0.5 years).

For factorers, successfully converting their accounts receivable into cash improves the company's cash flow position and increases leverage.

For the special plan SPV, income from transaction spreads and handling fees was obtained.

For investors, interest income related to accounts receivable is obtained by purchasing these ABS.

Same as above, the difference is that overseas business involves exchange rate conversion issues, so you can consider using the wrong currency withdrawal method to handle it.

What does it mean to withdraw funds with the wrong currency? For example, for example, I have 1,000 funds in Hong Kong, and now I have lent 800 to A, and A has not repaid the money. At this time, my small treasury only has 200, and A expects to pay me back at 1.15;

At this time, B also came to me to borrow 800 on the 1.10th. I only had 200 Hong Kong dollars in hand, but 5 days later, I will have 1,000 Hong Kong dollars. I hope to lend money to B, but if the RMB is converted into Hong Kong dollars, there will be an exchange. cost, what to do?

At this time, I can apply for a limit of 1,000 from the bank, withdraw 800 Hong Kong dollars, advance the payment first, and then return it to the bank after 1.15.

Here we look at the bank’s withdrawal behavior, which means withdrawing money in the wrong currency.