Commercial_Correspondence
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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
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VAT No. 2)522613o |
1 Why was Mr Hughes' 2 Why hadn't the |
3 How has he made |
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account overdrawn? |
£1,700 cheque been |
sure it won't happen |
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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
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In this letter, Mr Cliff |
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of Homemakers wants |
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to obtain either an |
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overdraft or a loan to |
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expand his furniture |
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factory. He asks for an |
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appointment to discuss |
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this, and explains why |
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he needs the money. |
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As it is an important |
9 |
matter, a letter is more |
appropriate than a |
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telephone call, fax, or |
U |
email. |
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E |
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X |
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Xi |
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1 Why does Mr Cliff |
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need an overdraft or |
w |
loan? |
0° |
2 What new line does |
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he want to put on the |
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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 |
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sheet? |
b enlarge |
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6 Which words in the |
c been greater than |
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d meet (orders) |
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letter have a similar |
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e assess |
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meaning to the |
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f checked (by an |
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following? |
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accountant) |
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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 |
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Date 27 September 20— |
Mr Richard Cliff |
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Homemakers Ltd |
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54-59 Riverside |
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Cardiff CFI. iJW |
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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 |
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the loan be paid into? |
letter have a similar |
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4 When will the credit |
meaning to the |
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following? |
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be available from? |
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a paid back |
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b a person who |
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guarantees |
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something |
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c contract |
Grantln, a loan |
to |
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= |
Mr Cliff and Mr Evans |
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have now had their |
oo |
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meeting and Mr Evans |
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has checked |
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Homemakers' accounts. |
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He has considered the |
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matter of the overdraft |
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or loan, and is now |
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replying. |
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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 |
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Date 19 November 20— |
Mr P. Ellison |
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Ellison & Co. Ltd |
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Bridgend Road |
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Bridgend CF313DF |
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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? |
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146
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
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 |
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Panton Works ! Hounslow I Middlesex I -rw 6 2B0 |
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TELEPHONE +44 (0)20 8353 0125 |
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FACSIMILE +44. (0)20 8353 6783 |
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EMAIL d.panton@panman.co.uk |
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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 |
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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. |
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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? |
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be paid? |
1 5 0
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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