Debt instruments like notes payable are really beneficial and companies or business organizations that need some operating capital may use or obtain a loan through any of the options of notes payable.

What is a note payable?

Well, it is basically a written promise where you promise to pay a certain amount of money on a specific future date, whether short term or long term. However, there are two types of notes payable option available for you—short term and long term. Short term notes are due within a year and long term notes (LTN) are due after one year.

There are a lot of advantages of the long term one and here are those –

1.    The ownership interest – This note payable method offers you the benefit of ownership interest. That means you don’t have to give away any ownership interest to the lender. The lender only has an expectation to receive the loan plus interest due but receives no equity ownership in the organization. You, as a borrower don’t have to worry about providing any other ownership to the lender.

2.    The interest rate – This payable method has a fixed interest rate. So you can plan and budget your payment according to the interest beforehand. And above all, the due date you get is a long term and there are no possibilities of being tied up into any current assets. That means the risk of loan default gets reduced and the debt capacity increases. What you benefit from it? Firm’s overall financial stability.

3.    Tax Deduction – When you take a loan in interest, it can be paid or can be deducted from your company’s income taxes. This is the reason when you use the long term option, you get benefited and people find the long term payment option to be quite attractive.

4.    Less Paperwork – Long term payable option doesn’t require much paperwork. Raising long-term debt capital does not require any paperwork to be filed with state and federal authorities. It also doesn’t require any kind of pre-approval from the authorities and the investors.

These are a few benefits of the long term debt capital and firms and companies are being benefited by the note payable since a long time. Whether it’s long term or the short term note payable, the instrument can help you grow in your business. We, “The Hanson Group of Companies” provide you a group of some of the best financial options for you.

Earning money is getting hard and comparatively losing them is very easy. So in order to provide financial security to you and your family, banks and finance companies offers best possible ways to monetize your investment. And one of the best and easiest ways to monetize your investments is using bank instruments.

By definition bank instruments are asset backed notes issued by a bank to an investor that mature over 5-10 years and until it matured to its pre-defined value they collect an annual interest. Banks and financial companies create paper notes or “IOU’s” with guaranteeing a certain annual interest and maturity value and they sell these to investors. As a result investors collect a guaranteed profit and the bank accesses immediate cash to meet with the capital requirements for any available additional financing opportunities.

SBLC, LTN, MTN, BG, SKR, POF, Monetization, KTT etc are some banking instrument that are popularly used these days and some of the advantages of using them as guarantee are:

1.    Use of flexible terms: There are lot of terms available to use in your bank instrument such as one, two, three and five years of terms. The use of term also depend on your loan facility like if you want then you can renew the term before the due date of the bank instruments maturity.
2.    Right to choose own delivery option: There are plenty of monetization or the delivery available for you to choose such as Euro clear, Bloomberg, Bank Swift, DTCC etc and you are free to choose whichever available option you prefer.
3.    Right to negotiate your terms and conditions: You can acquire some of the benefit of bank instruments even if it is borrowing. And some of these benefits are gain from the interest rates and the LTV or loan-to-value ratios. Even if the bank instrument is borrowed if the issued bank is a top grade European bank then you will able to get worldwide acceptance of the guarantee. And if you want these guarantees also able to help you and also provide you opportunity to do business in the international or cross border platforms too.
4.    Until it reaches a certain amount of time your instrument is fixed: One of the main facts of any bank instrument is they cannot be cancelled or withdrawn in the mid-term until they gain full maturity.

Using bank instruments as Collateral or guarantee has lot of benefits and they not only give you benefits in the present but also provide various future benefits too and lot of people are happy by using these instruments.

SBLC letter of credit and bank guarantee a bank face risk, but since bank guarantee offers more protection so the risk also becomes higher.

Bank guarantee and standby letter of credit mostly used when one makes an international transaction and for the purpose of U.S. sales, purchases and transactions when you need proof that you can access cash on the short notice. If you are making a purchase then bank guarantee is safer and in case of selling a standby letter of credit is more useful.

The similarity in bank risk: In case of both SBLC letter of credit and bank guarantee a bank face risk, but since bank guarantee offers more protection so the risk also becomes higher. You will not have an automatic approval in case of this type of document. Due to the involvement of the risk, banks might accept or deny your request depending on your credit standing.

Similarities of both: One of the main similarities of both standby letter of credit and bank guarantee is for the purchase you made bank will give a guarantee of payment to the seller. Sellers can ensure their payment for the things they sold, by "call in" the bank guarantee or standby letter of credit. When a seller sold their things to you they normally expect a direct payment but if you fail to give payment in time, then the seller can ask your bank to act upon the standby letter of credit or bank guarantee for the payment. These days’ standby letter of credit and bank guarantee document are very popular due to the uncertainties of international sales and currency exchanges.

Differences in protection: There is a very big difference can be spotted in the standby letter of credit and bank guarantee, despite both of them ensure the payment of seller. In case of bank guarantee as a standby letter of credit, it also protects the seller but it also gives protection to the buyer too. Since both documents provide protection to the seller, they can choose either of them. But buyers more prefer a bank guarantee because they can give you protection if the seller did not send your purchase item or it the item is damaged in the time you receive and reimburse the money from the seller.

The difference in the performance: In case of an international sale, a seller more prefers a standby letter of credit over bank guarantee. They more prefer a standby letter of credit because it is not only you will receive your guaranteed payment fast and it also involves currency conversion, if needed. But a bank guarantee is triggered only when either buyer or seller is non-performing.