Bank Draft: How is it effective and reliable for business growth?

With security and reliability of payment being paramount, bank drafts provide trusted payment solutions for individuals and businesses alike. 

Suppose you are making a high-value purchase, paying a vendor, or working with international partners and require guaranteed payments. Bank drafts can reduce your risk of fraud and simplify difficult transactions. 

In this blog, we will discuss what a bank draft is, how it works, and why it remains a preferred payment method today.

What Is a Bank Draft and How Does It Work?

A bank draft is a secure payment method that a bank issues on behalf of a customer, guaranteeing payment to the recipient. The bank withdraws the amount from the payer’s account and holds the funds until the payee presents them. Unlike a personal cheque, a bank draft is paid for with the bank’s funds, making it a safe and guaranteed payment mechanism. 

How to Fill Out a Bank Draft? 

A bank draft provides secure payments and requires accurate information when filling out a draft for processing. The following information is required:

• Exporter and Importer Details: Typically, this means the names and respective addresses for both the sender and receiver.
• Bank Name and Branch: Means the full name of the issuing bank and the booking branch of the bank.
• Payee Name: The payer’s full legal name, whether that name is an individual or a company. 
• Amount in Figures and Words: The payment amount will need to be reiterated both ways.
• Currency Type: The payment type that is being dealt with if the currency is a foreign exchange. 
• Purpose of Payment: A brief note or invoice number, at a minimum, will need to be provided. 
• Signature and Authorization: A signature is what will signify that the account holder is authorizing the draft. 
• Any Required Documents: This may require any trade documents needed, invoices, or identification.

Bank Draft vs. Other Payment Methods

When making secure and large-value payments, it’s important to choose the right method. Here’s how bank drafts compare with other commonly used payment options:

• Bank Draft and Cheque: Bank Drafts are guaranteed by the bank, as opposed to cheques, which may bounce for insufficient funds.
• Bank Draft and Certified Cheque: Both are secure methods of payment; however, a bank draft, CC is drawn from the bank’s funds, making it more secure.
• Bank Draft and Money Order: Money orders are used for smaller amounts of money and are more accessible. Bank drafts are a better option for larger formalized transactions.
• Bank Draft and Wire Transfer: Wire transfers provide a quicker electronic transfer. Bank drafts have a physical draft and will take longer to arrive.

Why Do Businesses Prefer Bank Drafts? 

• Provides Guaranteed Payment and Builds Relationships: Unlike a cheque, where payment may bounce, bank drafts are backed by the issuing bank, ensuring recipients can have confidence that payment is guaranteed.
• Decreases Payment Fraud Risk: With a bank draft, once the bank issues the draft, it will be debited from the account, eliminating counterfeit and fraudulent payment potential.
• Improved Cash Flow Predictability: Bank drafts are predetermined in nature, which helps businesses think of when and how much money is moving.
• Assures Easy International Trade: Bank drafts are accustomed to being used internationally and allow businesses to pay suppliers internationally without currency or trust issues.
• Stronger Business Relationships with your Suppliers: Drafts demonstrate timely and secure payments, which help establish credibility and trust with vendors/partners.
• Provides Legal Proof of the Transaction: Bank drafts can be used as proof of payment if required for an audit, dispute, or legal meeting.

How to Get a Bank Draft from Your Financial Institution? 

To obtain a bank draft, either visit your bank in person or use their online banking system (if available) and request your draft by giving them the payee’s name, amount, and reason for the payment. The bank will then debit your account, and once the draft is issued, you can deliver the document to the person you are paying.

When to Use It? 

Bank drafts are best used with large transactions such as buying property, business transactions or international payments where a payment is required that is guaranteed, safe and traceable.

How Pacific Corp Simplifies Your Bank Draft Needs?

At Pacific Corp, we take the complex world of bank drafts by assisting clients in the UK and worldwide to secure financial and banking solutions with efficiency and professionalism. 

So, whether you are an individual or a business requiring secure and effortless payments, we can process your bank draft quickly, reliably, and professionally, every time. 

With our global reach and banking relationships, you can concentrate on the transactions and let us deal with all the associated paperwork.

FAQs

1. Who can apply for a bank draft from Pacific Corp?

If you are an individual or business that needs secure payment, basically, any person or business can apply.

2. How long does it take to process a bank draft?

Generally, bank drafts take 1 – 3 business days to process, depending on the bank.

3. Is a bank draft safer than a regular cheque?

Yes, a Bank Draft is guaranteed by the bank; therefore, the risk of the underlying cheque bouncing is significantly reduced.