Credit versus clearing Strictly speaking a bill of exchange, pejoratively called "real bill" by Milton Friedman following his mentor Lloyd Mints, is not a credit instrument. It enables the market to clear goods in most urgent demand without needlessly invading the pool of circulating gold coins that would cause monetary contraction whenever division of labor is further refined and production processes are made more "roundabout" (to use the phrase of Bëhm-Bawerk) by the most progressive elements in the ranks of entrepreneurs and inventors. The real bill circulates on its own wings and under its own steam by virtue of the urgent demand for the underlying consumer good.
Self-liquidating credit In spite of the conceptual difference between credit and clearing, it is customary to extend the concept of credit to include, in addition to credit arising out of the propensity to save that finances fixed capital, self-liquidating credit arising out of the propensity to consume that finances circulating capital in the final phases of production of merchandise moving sufficiently fast to the final, gold-paying consumer.
Most commercial clients demand net 30 day terms as a condition of working with your business.
And as a small business, you can either work with it or .
A self liquidating transaction is one that carries the mechanism for it’s own repayment (or liquidation).For this reason bills of exchange are limited to maturities 91 days or less.Under no circumstances would a bill circulate after maturity.Twenty years ago, most ABL lenders were independent of banks.Since that time, banks have acquired and/or built their own ABL units and now dominate the market.
Most entrepreneurs and small business owners have limited number of options when it comes to financing their businesses.