Bill discounting — learn everything about bill discounting and promissory notes all in one place
A promissory note has been present in our region for over a century and is a commonly used means of payment. In addition to being a payment instrument, it is often used as a guarantee in business transactions. As a widely accepted financial instrument, the promissory note is frequently used in everyday business operations.
What is a promissory note?
The Law on Promissory Notes does not explicitly define the term, but its provisions clearly outline what a promissory note is. Because of this, there is no single, universally accepted definition.
A promissory note is an unconditional, payable security. It is strictly formal in nature, and to be considered valid, it must contain all the mandatory elements prescribed by law.
Since this page is dedicated to promissory note discounting, we won’t go into further details about the instrument itself. For more information, it’s best to refer directly to the Law on Promissory Note.
What is discounting?
Discounting is a term that refers to the reduction of the nominal value of a promissory note or another security by the amount of the discount. The discount amount is usually agreed upon as a percentage, but it doesn’t necessarily have to be.
For example, the discount can be set at 2% per month until maturity, or it could be a fixed amount of 100,000 dinars. This is entirely a matter of agreement between the parties.
What is promissory note discounting?
Promissory note discounting is a financial service where you submit your promissory note for discounting and receive funds to your account reduced by the agreed discount amount.
In other words, a promissory note is a security with a maturity date — a specific date when the note’s amount will be paid. Instead of waiting for the maturity date, you essentially sell the note, and the price you pay is the value of the discount. It’s important to clarify that at the moment of discounting, you won’t have any cash outflow — the note’s value is simply paid to you reduced by the discount.
For example, you’ve received a promissory note from your customer as a means of payment in the amount of 100,000 dinars. You agree with a financial institution to discount this note, and the discount amount is 2,000 dinars. You receive 98,000 dinars to your account, while the institution that discounted the note waits for its maturity.
Which promissory notes can be discounted?
Any promissory note that meets the legal requirements can be discounted. Alchemist Faktor accepts for discounting both own and drawn promissory notes, issued on the official form prescribed by the National Bank of Serbia and registered within the National Bank of Serbia’s system.
Of course, these are only the formal conditions necessary for a note to be eligible for discounting. Once these are met, we will assess the creditworthiness of both the issuer and the endorser of the note to determine whether, and under what terms, we can proceed with discounting each specific promissory note.
What is the cost of promissory note discounting?
In most cases, Alchemist Faktor negotiates a discount rate expressed as a monthly percentage, calculated daily using simple interest from the date of discounting until the maturity date of the promissory note.
The discount rate typically ranges from 1.5% to 3% per month, but it can vary significantly depending on several factors — such as the value of the note, the annual volume of discounting, the size of the company, and other specifics.
Why should you discount promissory notes?
The main benefits a client gains from discounting promissory notes are timely access to liquid funds, creating opportunities for significant improvement and expansion of business operations. Additionally, it ensures better competitiveness in the market, especially considering the increasingly common demands from customers for extended payment terms.
The promissory note discounting service is carried out by signing a Promissory Note Discount Agreement and endorsing the promissory note subject to purchase by Alchemist. The client’s account is then credited with the nominal value of the note, reduced by the calculated discount amount (from the purchase date to the note’s maturity date), as well as the agreed discounting commission.
Once the purchased note is collected, the full nominal amount of the promissory note claim belongs to Alchemist.
How is a promissory note discounted?
The process of discounting a promissory note is very straightforward. A promissory note is a tangible security (it exists in physical form) and is discounted through a full endorsement. You can learn more about endorsement at the following link.
The first step is to send us a promissory note discount request. After we receive your request, we’ll contact you shortly — if we have any additional questions, we’ll kindly ask you to provide the necessary information.
Once we have a complete picture of the transaction, we’ll send you an offer. After we agree on the discount rate, you’ll bring the promissory note to us and endorse it on the back with a full endorsement. The funds are immediately transferred to your account (the nominal value of the note minus the agreed discount).
There are no additional costs beyond the discount fee itself.
How long does it take to complete a promissory note discount?
The promissory note discount transaction can be completed in a very short time — usually on the same day after you’ve delivered the properly completed promissory note along with the required documentation.
How do I submit a request for promissory note discount?
We understand that our clients have different work habits, so we strive to accommodate everyone. If you are comfortable with technology, you can fill out the electronic request form or contact us via the contact form or email. If you prefer, you can also call us at +381 11 406 92 90.