What is a clean bankers acceptance?

A clean bankers acceptance is basically one that does not require a letter of credit. It is actually a short term loan made specifically to purchase inventory from another company or individual. These types of bankers acceptances are usually used for domestic trading, not international trades.

To qualify for a clean bankers acceptance, a buyer must be buying goods that will be traveling at least 50 miles, or across state boundaries. The term for these types of loans usually are 180 days or less, depending upon how long it usually takes you to turn your inventory back into cash. Basically, the bank who issues you the bankers acceptance simply “accepts” your promissory note to pay them a certain amount, plus interest, in the future. They then buy this not from you, and it is turned into cash for you to use to buy inventory.

Once your sell these goods, you pay back the bank, and you are clean. Clean bankers acceptances are much easier than the more complex ones, and are very useful because they allow starting companies, or any companies, to buy goods from a longer distance without needing to pay all cash up front. They are especially good if the company does not have good credit.
 

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