What is an Accommodation Bill?

An Accommodation Bill is signed by a third party called an accommodation endorser. This bill enables the second party to obtain a loan or credit for a specific purpose. The third party stands as the guarantor for the second person to secure credit or a loan.

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Example of Accommodation Bill

Three methods can be used to process fees under accommodation bill arrangements. They are the following;

Party accepting an invoice solely for ordering

In the process, parties that need credit open accounts that are accepted by friends without any consideration. In this scenario, if a party needs money urgently, he can give an invoice to his friend requesting funds. At the due time, the person who collected the fund pays to the friend that accepted the invoice which is then paid.

A bill drafted for mutual benefit

In this scenario accommodation bills are assigned and influenced by mutual benefits. If Mr A attracts a bill which is accepted by Mr B with an agreement that some parts of the revenue will be sent to Mr B who accepted the bill, this is an instance of mutual benefit. Parties involved in this type of accommodation bill arrangement assign discounted fees at the same rate that align with the funds assigned to the account.

When both parties request

If both parties request the same amount of money or different amounts at a time, both are liable for the cost of each invoice. However, the agreement of both invoices are respected and fulfilled at the appropriate time agreed upon.