In: Finance
. Explain the difference between a “Bill of exchange” and “Promissory note”. Why might the issuer of promissory note require the service of an underwriter?
Difference between both negotiable instruments are as below
1) Bill of Exchange is a written order drafted by the drawer on drawer to pay specific sum within a mentioned time period without any condition
Whereas a promisory note is a written promise made by drawer to pay specific amount to the drawer on a specific date
2) Bill of Exchange is drawn by Creditor
Promisory Note is drawn by Debtor
3) Acceptance is required in case of bill of exchange but no acceptance is required for promisory note
4) Parties involved in case of bill of exchange are Drawer, Drawer, Payee
In case of Promisory Note are
Drawer and Payee
Now moving to second part of question why issuer of promisory note require service of underwriter
Since In case of promisory note, it is issued by payer to payee,
Payee may ask payer to get service of underwriter to verify the financial information and information on the promisory note and of the payer, to make sure that promisory note is genuine and he will be able to repay on the date of payment