Bankers' Acceptances (BA's) offer your company the opportunity to access rates that are better than Prime-based borrowing rates. Your company can issue BA's to fund a floating-rate operating line or term loan while fixing borrowing costs for periods, subject to market availability, from 1 month to 1 year (however, rates can be fixed to a maximum of 20 years with a swap).
Bankers' Acceptances are short-term promissory notes issued by corporations that are unconditionally guaranteed by a chartered bank. In return for assuming the credit risk of the corporation in the BA's, the bank charges an up-front "stamping" fee. The issuer's borrowing cost is equal to the discount to the face value of the promissory note at which the BA was sold plus the stamping fee. BA's are issued at a discount and mature at face value. The interest rate is inherent in the discounted price. Minimum issue size is $100,000 and in multiples of $1,000 thereafter.
Benefits to your company:
- The company is assured of paying competitive rates as determined in the open market, based on the supply and demand for short-term money. The result is that your company often receives better rates than a Prime- based loan.
- Combining a BA with a Swap allows you to fix borrowing costs for a longer period of time.
For more information contact a Relationship Manager
at the Commercial Banking Centre nearest you!
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