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OE. 92Enrjrlat

le, Amu lAtqL

21 Mead Road, Swansea

West Glamorgan 35T 1DR

Telephone: +44 (0)1792 58441

Fax: Swansea +44 (0)1792 59472

Email: r.hughes@huson.co.uk

10 August 20—

Mr D. Collis

Manager

Welsh Co-operative Bank

Seaway House

Glendower Road

Swansea

West Glamorgan 8RN 1TA

Dear Mr Collis

Thank you for your letter of 8 August. I apologize for not being aware that I had a debit balance on my current account.

I have now checked into this and discover that the reason for my account being overdrawn was that I had received a post-dated cheque for £1,700.00 from a customer, and this had not been cleared. However, to avoid a repetition I have transferred £1,500.00 from my deposit account into my current account, and this should ensure against overdrawing in future.

Thank you for passing the credit transfer to Homemakers despite the debit balance it created.

Yours sincerely

RobertHughes

Robert Hughes

 

 

VAT No. 2)522613o

1 Why was Mr Hughes' 2 Why hadn't the

3 How has he made

account overdrawn?

£1,700 cheque been

sure it won't happen

 

cleared?

again?

Repily to advice of an oviavolvauen account

Mr Hughes is aware that the credit transfer

could have been stopped, which would have been embarrassing for him, especially as he had recently arranged monthly settlements with Homemakers

a›see pages 121-122

and there had earlier

been a problem over

a credit transfer

.see pages 93-94.

ea a,

9

mum *wen

14 3

Request fierr an cpverroliraft err ban

 

In this letter, Mr Cliff

 

of Homemakers wants

 

to obtain either an

 

overdraft or a loan to

 

expand his furniture

 

factory. He asks for an

 

appointment to discuss

 

this, and explains why

 

he needs the money.

 

As it is an important

9

matter, a letter is more

appropriate than a

 

telephone call, fax, or

U

email.

 

E

 

X

 

Xi

 

 

1 Why does Mr Cliff

 

need an overdraft or

w

loan?

2 What new line does

 

 

he want to put on the

 

market?

54-59 Riverside, Cardiff MIMI,

Telephone: +44 (0)29 20 49721

Fax: +44 (029 20 49937

Email: rcliff@homemakers.com

Registered No. c135162

18 September 20—

Mr I. Evans

Bamley's Bank Ltd

Queens Building

Cathays Park

Cardiff CF19W

Dear Mr Evans

I would like to make an appointment with you to discuss an overdraft or a loan to enable me to expand my business.

I have been testing the market with a new line of furniture assembly kits, and have found that demand for these kits, both here and overseas, has exceeded my expectations. In the past six months alone I have had over £6o,000 worth of orders, half of which I have been unable to fulfil because of my limited resources.

I would need a loan for about £18,000 to buy additional equipment and raw materials. I can offer £8,000 in ordinary shares, and £3,000 in local government bonds as part security. I estimate it would take me about nine months to repay a loan of this size.

I enclose an audited copy of the company's current balance sheet, which I imagine you will wish to inspect prior to our meeting.

I look forward to hearing from you.

Yours sincerely

P,icitaird Ct9

3 What security does he offer?

4What evidence does he offer to show his company is in a healthy state?

Richard Cliff

Director

Enc.

5 What is a balance

a talk about

sheet?

b enlarge

6 Which words in the

c been greater than

d meet (orders)

letter have a similar

e assess

meaning to the

f checked (by an

following?

accountant)

 

144

BARNLEY'S BANK plc

Head Office Queens Building . Cathays Park • Cardiff cm. 9uJ

Telephone +44 (0)29 20 825316

Email ievans@barnleys.co.uk

Fax +44 (0)29 20 613625

www.barnleys.com

 

Date 27 September 20—

Mr Richard Cliff

 

Homemakers Ltd

 

54-59 Riverside

 

Cardiff CFI. iJW

 

Dear Mr Cliff

With reference to our meeting on 23 September, I am pleased to tell you that the credit for £18,000 which you requested has been approved.

We discussed an overdraft, but agreed it would be better if the credit were given in the form of a loan at the current rate of interest (—%), calculated on half-yearly balances.

The loan must be repaid by 30 June 20—, and we will hold the £8,000 ordinary shares and £3,000 local government bonds you pledged as security. We agreed that the other £7,000 would be guaranteed by

Mr Y. Morgan, your business associate. I would appreciate it if you could ask him to sign the enclosed guarantor's form, and if you could sign the attached agreement.

The money will be credited to your current account and will be available from 30 September subject to your returning both forms by that time.

I wish you success with the expansion of your business and look forward to hearing from you.

Yours sincerely

EVAPIS

Ian Evans

Manager

Enc

Chairman B. D avenport

Directors B.R. Lewin v.c.,D.F.C., c.r.s., A.L.Brodwin A.I.C.A., N.Chardis

1What does Mr Evans offer Mr Cliff?

2How is the interest on the credit to be charged?

Reg. No Cardiff 3516614

3 Which account will

5 Which words in the

the loan be paid into?

letter have a similar

4 When will the credit

meaning to the

following?

be available from?

a paid back

 

 

b a person who

 

guarantees

 

something

 

c contract

Grantln, a loan

to

 

=

Mr Cliff and Mr Evans

=

have now had their

oo

 

meeting and Mr Evans

 

has checked

 

Homemakers' accounts.

 

He has considered the

 

matter of the overdraft

 

or loan, and is now

 

replying.

 

9

Jana! dulex3ai

tO

UI

5

145

ba Refusiing an _v oveml van

A

Mr Ellison's company owns a chain of petrol stations and garages. He is also a customer of Barnley's Bank and has also asked for an overdraft, but in his case the bank is not willing to lend him the money.

Example letter

BARNLEY'S BANK plc

Head Office Queens Building • Cathays Park • Cardiff c F 1 9W

Telephone +44 (0)29 20 825316

Email ievans@barnleys.co.uk

Fax +44 (0)29 20 613625

www.barnleys.com

 

Date 19 November 20—

Mr P. Ellison

 

Ellison & Co. Ltd

 

Bridgend Road

 

Bridgend CF313DF

 

Dear Mr Ellison

I regret to inform you that we will not be able to offer the credit of £85,000 you asked for at our meeting on 14 November in order to expand your business.

You have had a £26,000 overdraft this year, and this has partly influenced our decision. The current credit squeeze, which has particularly affected loans to the service sector of the economy, was also a factor. May I suggest that you approach a finance corporation as this type of organization might be in a better position to help in the current financial climate?

I am sorry that we have to disappoint you in this matter, and hope that we may be of more help in the future.

Yours sincerely

fax Etnuis

Ian Evans

Manager

Chairman B. Davenport

Directors B.R.Lewin v.c., D.F.c., c.1.s., A.L.Brodwin A./.C.A.,N.Chardis

Reg. No Cardiff 3516614

'1 Why did Mr Ellison want the credit?

2 What two things

3 What alternative

influenced Mr Evans's

does Mr Evans

decision not to allow

suggest to Mr Ellison?

credit in this case?

 

146

can be
PAYMENT (D/P)
the example
the example on
INLAND BILLS.A CLEAN BILL

International banking

On page 78 we looked at various methods of payment used in trade outside the UK. Here we look in detail at two methods of payment, bills of exchange and documentary credits, and the way in which they involve banks at home and abroad.

BILLS OF EXCHANGE

A BILL OF EXCHANGE (B/E) is an order sent

by the DRAWER (the person asking for the money / exporter) to the DRAWEE (the person paying / importer) stating that the drawee will pay, on demand or at a specified time, the amount shown on the bill. If the drawee accepts the bill, they will sign their name on the face of it and date it >see

page 150.

The bill can be paid to a bank named by the drawer, or the drawee can name a bank they want to use to clear the bill e›see

on page 150. In the latter case, the bill will be kept at the drawer's bank until it is to be paid. When the bill is due it is presented to the paying bank. Such bills are said to be domiciled with the bank holding them.

It is possible to send the bill direct to the drawee, if they are well-known to the drawer.

A SIGHT BILL Or SIGHT DRAFT is paid On

presentation. In a DOCUMENTS AGAINST transaction, the sight bill is

presented to the importer with the shipping documents, and the importer pays immediately, i.e. on presentation or at sight.

A bill paid DAYS AFTER SIGHT (D/S)

paid on or within the number of days specified on the bill. For example, 3o days after sight (or 3o D/s) means that the bill can be paid thirty days after it has been presented. A bill which is paid after a period of time is celled a usance.

In a DOCUMENTS AGAINST ACCEPTANCE

(DLO transaction, the bank will ask the drawee to accept the bill before handing over the shipping documents.

In the UK, bills of exchange drawn or payable in another country are known as FOREIGN BILLS, and those used within the country in which they are drawn up as

is one that is not accompanied by shipping documents.

The advantage to the exporter of payment by bill is that the draft can be DISCOUNTED, i.e. sold to a bank at a percentage less than its value, the percentage being decided by the current market rates of discounting. So even if the bill is marked go days after sight, the exporter can get their money immediately by selling it to a bank. The bank, however, will only discount a bill if the buyer has a good reputation.The advantage for the importer is that they are given credit, provided the bill is not a sight draft.

Bills can be negotiable if they are ENDORSED (signed on the back) by the drawer. For example, if Mr Panton, the drawer of the bill on page 150, wanted to pay another manufacturer, he could sign on the back of the bill, i.e. endorse it, and the bill would become payable to the person who owned it. Mr Panton can endorse it specifically, i.e. make it payable only to the person named on the bill.

A DISHONOURED bill is one that is not paid on the due date. In this case the exporter will PROTEST the bill, i.e. they will go to a lawyer, who will, after a warning, take legal action to recover the debt.

There is also a Cash Against Documents transaction (cAD), where the documents are handed over to the importer when cash has been paid. In these transactions, of course, there is no bill of exchange and the importer (buyer) is not given credit.

147

twenty thousand
r>See page 150 for another

A typka& b(i of emthange

Bills of exchange vary in layout from company to company.

example.

Number

_(2)

Exchange for _(1)

At _(3) _pay this _Bill of E ange

(4) _to the or

—(5)

(6)

Val -received_(? _placed to account

To _(8)

_ (9)_

_(9)_

1 Currency and value of the bill of exchange in figures

2Date the bill is completed

3When payment is due, e.g. sight; pis after

sight; on a particular date, e.g.12 October

20-

4 If only one bill of exchange is required, you write sola. If more than one is required, write first; and on the second line before the words to the order of write second of same tenor and date unpaid. This means there are two copies of this bill, i.e. a second (tenor) copy. The drawee only signs (accepts) one copy of the bill.

5 Name of seller writing the bill (the drawer) or the name of another nominated person

6 Write in words the currency (e.g. euros or yen) and the amount, e.g.

written in (1)

7 Left blank unless there is a specified form of words to be written, e.g. payable at the current rate of exchange for banker's drafts in London

8 Name and address of the person or company the bill is being drawn on, i.e. the drawee

9 Enter the name of the company (the drawer's name); name and position of the person signing the bill (the signatory)

1 48

Panton Manufacturing Ltd

PanTon

 

Panton Works ! Hounslow I Middlesex I -rw 6 2B0

 

TELEPHONE +44 (0)20 8353 0125

 

FACSIMILE +44. (0)20 8353 6783

 

EMAIL d.panton@panman.co.uk

 

2nd March 20—

Mrs B. Haas

B. Haas B.V.

Heldringstraat 180-2

Postbus 5411

Amsterdam 1007

The Netherlands

Dear Mrs Haas

Order No. 8842

Thank you for the above order which has now been completed and is being sent to you today.

As agreed we have forwarded our bill, No.1671 for £3,860.00, with the documents to your bank, Nederlandsbank, Heldringstraat, Amsterdam. The draft has been made out for payment 30 days after sight, and the documents will be handed to you on acceptance.

Yours sincerely

Do Puta Panto&

Donald Panton

Managing Director

Registered No. England

266135

1 Where has the bill of

2 When should the bill

3 How can Mrs Haas

exchange been sent?

be paid?

obtain the shipping

 

 

documents?

Advising despatch of a

Panton Manufacturing have completed an order for a Dutch customer. They now advise the customer that the agreed bill of exchange has been sent.

9

anal aidwex3

10

149

ta

9

Example bill of exchange

tn Q.)

00

off eitehange

Here is the bill mentioned in the previous letter. It has already been accepted by the drawee, who has named a bank in London which she wants to use to clear it.

B/E No.1671

30 days after sight pay to the order of

Panton Manufacturing Ltd Lo don Three thousand ei • ht hun ed and s

March 20—

ounds onl st

value received payable at the

ent rate of exchange for Ba er's sight

drafts on London.

 

To B. Haas B.V.

Heldringstraa

Amsterda ned DogatotPaat-okt,

anaging Director

1 What type of bill is

2 Who is the drawee?

3 When must the bill

this?

 

be paid?

1 5 0

 

Jan Lindquist

'Subjec

Advice Order No.8540

Dear Jan

The above order is now on board the Leda, sailing for Copenhagen tomorrow, arriving Thursday.

As there was no time to check references, we drew a sight draft for the total amount of £4,150

(four thousand, one hundred and fifty pounds sterling). This was sent to Nordbank, Garnes

Vej, Copenhagen, and will be presented to you with the documents for payment.

If you can supply two business references before your next order, we will put the transaction on a documents against acceptance basis with payment 40 days after sight.

Best wishes

Donald Panton

Managing Director

Panton Manufacturing Ltd

Tel: +44 (0)20 8353 0125

Fax: +44 (0)20 8353 6783

Email: d.panton@panman.co.uk

Advisins despatch of a sight

The bill on page 150 was for payment thirty days after sight. If the supplier wants immediate payment or does not have time to check the customer's creditworthiness,they may send a sight bill, as in this example.

03

7

co

9

m

3 -a

ro to

3

15 1

Request to a bath

to forward a bin

Exporters sometimes

ask their banks to

forward bills to

importers' banks.

9

Example letter

Panton Manufacturing Ltd

Panton Works I Hounslow I Middlesex I rw 6 21:10

TELEPHONE +44 (0)20 8353 0125

FACSIMILE +44 (0)20 8353 6783

EMAIL d.panton@panman.co.uk

6 July 20—

The Manager

Mainland Bank plc

Portman House

Great Portland Street

London W1N 6LL

Dear Sir

Please send the enclosed draft for £4,163.00 on J.K.B. Products Pty and documents to the National Australian Bank, 632 George Street, Sydney, Australia, and instruct them to release the documents on acceptance.

Yours faithfully

DOKAL6PaditOkt.

Donald Panton

Managing Director

Enc.

Registered No. England 266135

152

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