What are Bankers' Acceptances?

Bankers' Acceptances are primarily used in international trade. Companies use them as a way of securing payment from customers. They are essentially a post-dated check.

Example

A paper company has been requested to sell 10 million sheets of paper to a client in a developing country. They are uncertain if they can trust them to make the payment. So, they have them sign a bankers' acceptance. This means that if they cannot pay the money they owe the bank will pay it. This puts the customer at debt, but gives the selling party confidence that their order payment will be filled.

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