Cheque Discounting: What Is It And How Does It Work?

Cheque Discounting

In the world of business, cheque discounting is a common way for companies to get the cash they need quickly. It’s a process where banks or other financial institutions (including Mwananchi Credit) will buy cheques from businesses and then collect payment for those cheques from the original payers (customers) over a certain period of time.

Cheque discounting can be beneficial for both parties—it gives businesses an easy and secure way to access funds without waiting for payments to come in, and it gives customers the ability to make purchases with their credit card or debit card.

If you’re interested in how cheque discounting works, read on! We’ll be teaching you everything you need to know about this common business practice.

What is cheque discounting?

Cheque discounting is a way for businesses to get their hands on some cash quickly from various banks and other financial institutions.

These financial institutions will buy your cheques and then collect the payment from the original payer over a certain period of time. For example, you might find yourself in need of Ksh. 1,000,000 right away—cheque discounting would allow you to access this KES 1,000,000 without waiting for people to pay you back.

It’s also worth noting that businesses that use cheque discounting in Kenya don’t have to wait for all their customers to pay them before they can receive money. It works by paying out a set percentage of the total amount, plus fees that the business agrees on with the bank at the beginning of the process. The customer pays back the bank as per their agreement with them and is not obligated to pay any interest or any additional fees.

How does it work?

An account holder will give a cheque to Mwananchi Credit, a financial institution. Mwananchi Credit will then purchase the cheque from the account holder and then collect payment for that cheque over a period of time.

So, how do you know what you’ll be charged for a particular cheque? 

There are two ways to find out:

  1. You can talk to us about the cost of a particular cheque before you actually make it.
  2. You can ask your customer what they’re willing to pay for the cheque before writing it.

You’ll want to keep track of how many transactions you write as well as how much is written on those transactions, as these factors will affect your final cost per transaction. If you process 50 transactions per month and each transaction has KES 100,000 written on it, your ongoing monthly fee would be KES 100,000 plus KES 500 per transaction (50 x KES 500).

Cheque discounting is an excellent option if you need quick cash and don’t want to wait until customers come in and pay their bills!

cheque discounting facility

If you’re looking for a quick way to access the funds you need without waiting for your customers to pay, cheque discounting may be an option. Generally, you’ll give your bank or financial institution a list of cheques that are good for them to collect over a specific period of time. The more cheques you send in, the more money will be available for you to use.

One of the benefits of cheque discounting is it gives businesses another way to pay their suppliers by giving them access to cash before their customers have paid. It also allows businesses to take credit card and debit card payments right away, so they can avoid waiting 30 days for the payment to clear with their bank account.

Cheque discounting might not be appropriate if you have a high volume of transactions that are very time-sensitive because it will take some time before banks collect payment from your customers and provide you with the funds.

Cheque discounting benefits

Cheque discounting is a way for companies to get the cash they need quickly. It’s a process where banks or other financial institutions like Mwananchi Credit LTD will buy cheques from businesses and then collect payment for those cheques from the original payers (customers) over a certain period of time.

Cheque discounting benefits

Cheque discounting can be beneficial for both parties—it gives businesses an easy and secure way to access funds without waiting for payments to come in, and it gives customers the ability to make purchases with their credit card or debit card.

As you may know, there are some downsides to traditional lending options. When you need funding quickly, it can be difficult to find someone willing to lend your company money on your terms. Lending options also often take weeks or months before they fund, which could delay your business’s growth. With cheque discounting, you have access to funds without waiting for traditional loans. And since cheque discounting is usually on an interim basis—purchases are collected over a certain timeframe—there are no long-term commitments. You can also reduce your risk of losing out on sales by card-on-file transactions with customers who frequently use credit cards or debit cards.

Drawbacks of cheque discounting

Cheque discounting does have its drawbacks. The biggest issue with this type of financing is that businesses will usually receive less than the amount they’ve written on their cheque, which means they could end up paying more in interest than they were expecting.

The interest rate banks charge can also be an issue as it can vary from bank to bank and has a lot to do with the size of your cheques and what kind of business you’re in. If you’re not careful, this could result in a situation where your company is paying too much for cheque discounting services.

If you’re considering using cheque discounting as an option for accessing funds, it’s important to look into the drawbacks and find out if they apply to you:

  • You may receive less than the amount on your cheque
  • Interest rates may vary from bank to bank
  • Your company may end up paying too much for these services.

cheque discounting in Nairobi

Mwananchi Credit LTD is the leading financial institution in cheque discounting in Nairobi Kenya. We buy cheques from businesses and then collect payment for those cheques from the original payers (customers) over a certain period of time. Get in touch with us via a call or email to find out how your business can benefit from this service.

Can I discount a post-dated Cheque?

It is possible to discount a post-dated cheque. However, the financial institution is required to provide payment for the cheques to the business on or before the date of issue.

Cheque discounting is used by every type of company—large and small, old and new, in Kenya and around the world. It’s a way that many businesses access cash quickly without waiting for customers to pay for products or services.

Conclusion

Cheque discounting is a way to get cash in hand for a cheque that will be paid by the person who wrote the cheque.

Rather than waiting for the cheque to be cashed, you can take advantage of this service to get your money in hand. One of the drawbacks of this service is that you don’t know when the person who wrote the cheque will come in to pay it. The other drawback is that you may not be able to offer cheque discounting to all of your customers.

Cheque discounting Kenya may be offered by banks or other financial institutions, but since it is not always available, you are welcome to choose Mwananchi Credit LTD as your own provider.

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