Q.What are commercial bills? How do they help in financing trade?

Commercial bills let a seller who has given credit to a buyer get paid immediately anyway, by involving a bank in between.

A commercial bill is a bill of exchange drawn by a seller on a buyer for the value of goods sold on credit, specifying the amount owed and the date by which the buyer must pay.

Commercial bills help finance trade in the following way: instead of waiting until the due date to receive payment from the buyer, the seller can take the bill to a commercial bank and discount it — the bank pays the seller the bill's value minus a discount charge, immediately, and then itself collects the full amount from the buyer when the bill falls due. This lets the seller convert a credit sale into immediate cash, without disturbing the credit terms already extended to the buyer, which is exactly the kind …

Confusing a commercial bill (financing a specific trade transaction between a buyer and seller) with commercial paper (a general working-capital- …