From the Discount Contract to the Discount Policy

The discount contract or commercial discount line is a product aimed at companies with receivables. It offers the possibility of advancing such payment without waiting for maturity, allowing them to obtain immediate liquidity.

The parties involved are normally a commercial company and a credit institution. The credit institution, in relation to the existing commercial risk, determines the term and the maximum amount to cover the payment.

In the discount policy, the financial institution grants the advance of funds based on documents such as invoices, promissory notes, bills of exchange and other commercial papers. But normally it is the company or commercial company that manages the collection and assumes the risk of non-payment (if payment is not made, it must return the money to the financial institution).

In the discount contract there are interests (fixed or variable), commissions (opening, renewal, fixed or nominal or for non-payment) and its formalisation can be carried out before a Notary.

Commercial discount contracts are a solution that most companies can use. To obtain a discount line, you must speak with your bank.

We can divide them according to their frequency of use or according to the effect to be discounted.

According to their frequency of use, we find the permanent commercial discount and the occasional or temporary one.

The permanent commercial discount line is an ideal option for companies that frequently use this financial solution and allows for the periodic discounting of bills while it is reviewed by the institution. In other words, a client can continuously discount invoices, bills of exchange, and promissory notes up to a certain amount.

Unless otherwise agreed (which will imply paying a special commission), the company contracting the discount assumes responsibility in case of non-payment: this means that the company is liable for paying the amount that the financial institution has advanced to them.

In the spot discount contract it does not occur online or periodically, but is offered as a solution for a single instrument (an invoice from a public contract, a tax credit, a promissory note or a bill of exchange) and they are usually without recourse for the company if a default occurs.

Depending on the instrument to be discounted, we also find:

Commercial effects are produced in an electronic format regulated and accepted by the participants (SEPA).

Commercial effects are physical, such as a promissory note or a physical receipt.

Furthermore, by ordinary discount we understand the financial solution that depends on the type and characteristics of the document such as its term or risk for commissions and interest. These commissions or interest are calculated based on the progression of the term, that is, from when the discount is made until the document matures. If the term is longer, more commissions and interest will be paid.

And, by forfait discount, we refer to discount policies in which the commissions and interest are fixed, applying a single percentage, regardless of the time remaining until maturity.

The factoring contract is also a similar financial resource, but the difference between factoring and line of credit lies in the service, the management of collection, and the risks. Thus, factoring is usually a longer-term contract and only commercial invoices are transferred. Furthermore, in factoring, it is the financial institution that manages the collection.

Regarding the assumption of risks, while in the discount contract the risk falls on the company, in factoring it will depend on whether it is with recourse or without recourse. Likewise, factoring includes services such as collection management, creditworthiness analysis, or even the assumption of default risk, which also means it includes higher fees, whereas the discount contract is limited to the advance payment of the amount of a commercial paper.

Finally, we can differentiate them in that the discount contract is used as an online or one-off operation to obtain early liquidity; factoring is offered as a comprehensive solution to various options such as the assignment of accounts, collection and its management, or the risk involved.

Banking operations can be with recourse or without recourse, depending on whether the beneficiary retains responsibility in the event of non-payment.

• Operation with recourse: If the debtor does not pay, the bank can claim the debt from the assignor (the one who transferred the credit). That is, the assignor remains responsible and must bear the non-payment.
• Operation without recourse: In this case, the bank assumes the risk of non-payment and cannot claim the debt from the assignor. Once the credit is transferred, the assignor is free from any responsibility.

In the discounting of promissory notes, if it is with recourse, the company that assigns the promissory note remains responsible if the debtor does not pay. If it is without recourse, the bank assumes the risk and the company will not have to respond in case of non-payment.

Once an agreement has been reached between the parties involved, the discount policy must be signed before a Notary. The Notary plays a fundamental role and is involved in granting legal validity, certifying the signature and consent of the operation so that the content is fully arranged according to the law.

Likewise, they facilitate enforcement in the event of non-compliance with the agreed terms through judicial means, as the notarial discount contract prevents challenges before a court and reduces the risk of litigation.

The Notary will authenticate the signatures and keep the original signed document. They will issue the necessary copies for the signatories.

The figure of the Notary plays a fundamental role in this process as they will guide and assist you at all times, resolving your doubts and advising you on the best options for you, even considering other types of policies. You can choose the Notary you wish and not simply the one proposed by the other party involved.

Contact us for your enquiry wherever you are through our Online Notaries service. The intervention and signing of the discount policy before a Notary will be carried out effectively.

The submission of at least the following will be required:

• Identification documents of the policy signatories
• Policy with the conditions.

The fees for processing a discount policy at a notary are regulated in the notarial tariff. The price of notarial acts is regulated by the Government and complies with the regulatory framework of the NOTARIAL TARIFF (RD 1426/1989, of 17 November, regulating the Notaries' Tariff).

The cost of the policy depends, among other aspects, on the amount of the debt and the number of pages of the policy.

However, the exact price of a notarial document cannot be calculated until its specific content is known, that is, until it is signed, as there are many circumstances that can cause it to vary. The number of copies requested of a document, the amount of the transaction, the pages it contains, as well as possible changes or additions, can slightly alter the final price.

If you wish to receive a personalised quote, we invite you to contact us directly through the method you prefer. You can do so via the contact form on the main page of this website, through the contact section found in the footer of the website, using the WhatsApp shortcut at the bottom right of this page, by sending an email to bcn@jlanotarios.com or by calling us on 93 159 17 62.