Financing notes refer to the noteholders who obtain commercial bills through non-trade means and apply to the bank for discounting and arbitrage funds to achieve financing purposes. The purpose of the financing note may be the drawer or the bearer, but it is generally an affiliated company, and the funds are usually returned to the original drawer after discounting. Its risks mainly include the following 4 aspects.
What is a financing note and what are the risks
1. Credit risk. If the credit profile of the holder or acceptor is not good, the financing note may not be cashed on time, resulting in financial losses to the holder.
2. Liquidity risk. The liquidity of financing bills is relatively poor, and the liquidity is weak, so they cannot be traded in the open market normally.
What is a financing note and what are the risks
3. Interest rate risk. The interest rate on financing notes is usually higher than the bank lending rate for the same period, and if the market interest rate fluctuates greatly, the holder will not only have to bear higher financing costs, but may also face additional risks from interest rate growth.
4. Policy risk: The government may take measures to restrict or prohibit the issuance and trading of financing bills, which may cause irresistible losses to holders.
What is a financing note and what are the risks
Do you agree? Your attention, comments + likes are the biggest motivation for my creation.
(Tianxiatong Commerce - your personal bill expert, the pioneer of bill Q&A, no longer confused in the face of commercial bill financing)