Discounting of Letter of Credit (LC) is a short-term credit facility provided by the bank. In the Letter of Credit discounting process, the bank purchases the documents or bills of the exporter and in return make him the payment for a security or a fee.

While discounting a bill, the Bank buys the bill (i.e. Bill of Exchange or Promissory Note) before it is due and credits the value of the bill after a discount charge to the customer's account.

The business gets the cash instantaneously giving business cycle a better momentum. It allows an entrepreneur to do business without funds. This works like a bank overdraft, the borrower pays the interest only on the amount of money utilized. There is a tough competition in the market to extend such credit and hence there are a plenty of different products to suit the needs of the client. There are borrowers who even cover the risk of bad debt alon

• The seller sells the goods on credit and raises invoice on the buyer.
• The buyer accepts the invoice. By accepting, the buyer acknowledges paying on the due date.
• Seller approaches the financing company to discount it.
• The financing company assures itself of the legitimacy of the bill and creditworthiness of the buyer.
• The financing company avails the fund to the seller after deducting appropriate margin, discount and fee as per the norms.
• The seller gets the funds and uses it