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Bankers’ Acceptances (BAs) are an excellent alternative to traditional short-term borrowing or commercial paper. If a company’s name is not widely known, or if the credit rating demands too high a borrowing premium to issue commercial paper in the company’s own name, then BAs may provide a lower cost borrowing alternative.
What It Is
A BA is an unconditional non-interest bearing note that is issued by a borrowing company. That order is evidenced by completing a special draft called a BA. On acceptance of the BA, HSBC Bank Canada assumes an irrevocable liability for the borrower’s debt (hence the name Bankers’ Acceptance). That typically increases the negotiability of the BA and reduces the company’s cost of borrowing. A stamping fee is charged on each draw date as compensation to HSBC Bank Canada for accepting the BA.
Who It's For
This service is used by companies borrowing minimum amounts of $500,000 for terms of 1 year or less.
Bankers' Acceptances Features
- Issued at a discount to face value
- Issued in bearer form
- Flexible maturity dates to a maximum of 1 year. Typically issued from 30 to 90 days
- Minimum issue size of $500,000
- Issued in multiples of $1,000
- Available in US and Canadian dollars
- Credit line required
- Established secondary market
