Explanation:

  • A draft, also known as a “bill of exchange”, is a traditional, long-standing trade instrument which has been used across the globe for hundreds of years; it is recognized by trading partners and financial institutions as a means of payment.
  • When a draft is drawn on a Buyer/Drawee it’s considered a Demand for Payment. When “Accepted” by the Buyer/Drawee it becomes a Trade Acceptance. The Acceptance adds Wal-Mart’s irrevocable payment promise to its Supplier/Drawer; to pay the accepted draft amount upon maturity.
  • Most countries have common laws governing Trade Acceptance (typically covered by negotiable instrument law).
  • The discount rate charged to suppliers is commensurate with the Wal-Mart’s credit rating, which is most often lower than the interest rate associated with the Supplier’s other forms of financing (Note: Pricing is provided on the needed cover letter. See the “Process Flow” tab ).
  • Trade acceptances are globally recognized, readily marketable, and easily transferable by simple endorsement.
  • Highly leveraged and/or smaller suppliers categorically benefit from low cost finance

Application & Benefits:

  • Once the Buyer has placed its acceptance upon the draft, the supplier may request:
    1. To sell the Wal-Mart. Accepted Draft, at a discount, to Citibank, N.A., or
    2. Citibank, N.A. to hold it, until its maturity.
  • Wal-Mart’s suppliers do not have to become clients of Citibank, N.A. nor sign any upfront legal agreements for either a. or b. above. When suppliers want to request Citibank, N.A. to purchase the Wal-Mart Trade Acceptance, they merely endorse the draft to Citibank, N.A. and complete the warranty statements located in Section 9 of the required Document Transmittal Form / Cover Letter which is required with each presentation.
  • The Supplier gets short term funding without recourse, at attractive rates (based on the Wal-Mart’s credit rating), and without using their own credit lines.