Introduction
Purchase by Bank of China of Accounts Receivable is a banking business in which the bank provides short-term financing to enterprises in the form of the purchase of the undue accounts receivable. Purchase of Accounts Receivable refers to the bank buying the creditor's rights in accounts receivable possessed by the seller (creditor) against the buyer (debtor) under the commercial contract while maintaining the recourse to the debtor. The bank may have the right of recourse to the creditor or not. The bank and the creditor will also agree that in case of the creditor not performing obligations under the commercial contract, whether the bank have the right of course to the creditor or not, the creditor will still have to undertake to re-purchase the account receivable unconditionally from the bank.
Features
1. With this service, the customer can strip the undue account receivable from the creditor's financial statement for improvement of the financial statement status;
2. With this service, the customer can turn the undue account receivable into cash rapidly to improve the customer's cash flow status;
3. With this service, the creditor may obtain advanced payment by the bank thereby to eliminate the credit risk in the collection of the account receivable.
Charges
Account receivable purchasing fees are agreed upon in the contract.
Application Qualifications
1. Corporations (creditor and debtor) applying for this service should be the legal entity;
2. Cooperation relationship between the debtor and the creditor shall last half a year or longer, and there is no default record in the process of cooperation for no reason;
3. The business contract must be established on normality, validity, good faith between the parties and with legitimacy;
4. On the day when the accounts receivable is transferred from the creditor to the bank, the accounts receivable should be owned by the creditor without guarantee, any rights or claims from the third party, and the account receivable transfer should be legal.
Required Documents
1. Application for account receivable purchase;
2. A ledger of the account receivable schedule;
3. Copy of the business contract;
4. Copy of the corporate business license annually verified;
5. Enterprise legal representative certificate or the letter of authorization, resolutions of the Board of Directors and the Articles of Association.
6. The legal report issued by an independent law office on legal validity and enforceability of the account receivable transfer;
7. Audited financial reports of the last three years.
Process
1. The creditor and Bank of China negotiate the details of the service;
2. Bank of China approves the above application materials submitted by the creditor;
3. The creditor and Bank of China sign the account receivable purchase agreement;
4. On the day of the account receivable transferred from the creditor to Bank of China stipulated in the agreement, the creditor applies to the bank for the account receivable purchase;
5. Bank of China will issue to the creditor a letter of confirmation for the purchase and will provide the customer with relevant funds.
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