confirming

The confirming is a service or operation considered of type "administrative and financial", where a company asks his bank that he issue a confirming, that is, the bank pay a bill to his supplier when the bill had expired. Likewise, this bank notify to supplier with a letter, in that letter the bank agrees to pay him that bill when the bill had expired. Then, really the credit institution is going to pay the bill to the supplier. The supplier can do two things, one of them is that he will go to his own bank and he will asks his money or he is able to go the payer bank and he will asks the money. Both ways, if he wants the money before the bill had expired, He must pay more. 

This operation has got three figures explained below:

  •          Payer or issuer: is the client who hires the service of the credit institution, the payer is the issuer in the confirming and he pays the bill to his bank.
  •          Bank: is the credit institution. This way the bank gives financing to customers and suppliers of the company.
  •          Beneficiary: is called supplier.

ADVANTAGES

  • Bank: increasing his income statement.
  • Supplier: cashing security.
  • Issuer: he saves administrative costs.

They also have a number of disadvantages are:

  • Bank: he has a high risk on a single customer.
  • Supplier: he should face the financial costs, owing to he wants the money before.
  • Issuer:  by hiring the service confirmig it is forced to work with a particular credit institution.

An example of confirming:

The company A goes to the Santander Bank because this company has got a debt with a supplier, who is the company B, the bill has an amount of one thousand euros. The Santander Bank sends a letter telling at supplier that ensures payment when the bill had expired. The company B needs the money now and he has two options. The first, He can go to the Santander Bank and they come to an agreement or he can go to his own bank, both options, the supplier asks money before the expiration date, then supplier can return one thousand and interests.

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