Accommodation Bill
Definition
A bill of exchange where a third party (the accommodation party) acts as guarantor, taking on liability if the main acceptor fails to pay, also cheekily nicknamed “windbills” or “windmills.”
Example
Example 1:
A small Kano trader needs to raise funds but lacks strong credit, a wealthy business associate signs the bill of exchange as the accommodation party, guaranteeing payment if the trader defaults, making the bill acceptable to lenders.
Example 2:
A startup in California needs financing but can’t secure it alone, a well-established investor signs as the accommodation party on their bill of exchange, backing the bill with his own creditworthiness and taking on liability if the startup fails to pay at maturity.