🧾 Commercial Drafts
US Capital Private Bank Knowledge Base
📌 Definition
A Commercial Draft is a written, legally binding order by one party (the drawer) directing another party (the drawee) to pay a specified sum of money to a third party (the payee) either on demand or at a set future date.
These instruments are essential in trade finance, letter of credit settlements, and project funding instruments. They are governed by the Uniform Commercial Code (UCC Article 3) and are considered negotiable instruments when properly endorsed.
💼 Parties Involved
| Icon | Role | Description |
|---|---|---|
| 🧾 | Drawer | The party issuing the draft and requesting payment. |
| 🏦 | Drawee | The party (often a bank or buyer) expected to make the payment. |
| 👤 | Payee | The party receiving the payment. |
🏛️ Legal Characteristics
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📜 Negotiable Instrument – May be transferred via endorsement and delivery.
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🖊️ Acceptance Required – A time draft must be accepted by the drawee to become legally binding.
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⏳ Time-Bound – Commercial drafts often specify a maturity date (e.g., “30 days after sight”).
🔄 Types of Commercial Drafts
| Type | Description |
|---|---|
| 🕐 Time Draft | Payable at a future date after acceptance. Common in international trade. |
| ⚡ Sight Draft | Payable immediately upon presentation and demand. |
| 🏦 Bank Draft | Issued and guaranteed by a bank, adding security to the transaction. |
🌐 Use in Trade & Banking
Commercial drafts are commonly used in:
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✅ Letter of Credit Transactions
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✅ Cross-Border Settlements
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✅ Sovereign and Institutional Trade Finance
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✅ Collateralized Project Instruments
Once accepted, a commercial draft can be discounted with a financial institution or traded in the secondary market, providing liquidity before maturity.
📖 Legal Framework
UCC Article 3 – Negotiable Instruments
A draft is a signed order that contains an unconditional directive to pay a certain amount of money to order or bearer. Acceptance creates primary liability for the drawee.
🔍 Related Terms
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Banker’s Acceptance
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Letter of Credit (LC)
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Bill of Exchange
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Sight Draft / Time Draft
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Discounting
🧠 Private Banking Insight
At US Capital Private Bank, commercial drafts are used as part of:
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GDP-linked sovereign finance programs
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Pre-approved trade project funding
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Structured private placement offers (PPOs)
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Compliance-screened high-value asset transfers
Commercial drafts handled by US Capital Private Bank are backed by Divine Law Trust structures and compliant with ICC UCP 600, ISBP 745, and Basel III liquidity standards.
📬 Contact US Capital Private Bank
📧 Email: [email protected]
🌐 Website: https://uscapitalprivatebank.com
📞 Phone: +971529926005
🎥 Learn more about commercial instruments and sovereign finance:
🔗 Watch Briefing Video