Discount (bills of exchange)

Updated: Aug 20, 2021

A bill of exchange may be discounted. This means that it is purchased by a third party for a sum lower than that party will receive when the bill matures. The person discounting the bill gains by receiving money at an earlier date. The amount of discount will vary according to the risk the purchaser takes. A good bill is one which is backed or countersigned by a well known finance house or bank. Bills are normally discounted with banks or on a larger scale with institutions known as on a larger discount houses.

Reference: The Penguin Business Dictionary, 3rd edt.

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