Glossary Bill of Exchange

A Bill of Exchange is a document that represents an unconditional order by the drawer to the drawee to pay a predetermined amount of money to the holder of the bill, or their assignee, on a specific date. The Bill of Exchange is typically used when the buyer and seller are in different currencies or have different currencies, and provides a guarantee of payment to the seller. The seller can present the Bill of Exchange to a bank, which will then pay the seller the specified amount of money upon the agreed-upon date, with the buyer being responsible for reimbursing the bank. In addition to providing a secure form of payment, the Bill of Exchange can also be used to finance trade transactions, as the seller can sell the Bill of Exchange to a third party, who will then pay the seller the value of the Bill of Exchange minus a fee.