Forfaiting and Its Benefits

Forfaiting, a trade finance product which buyers (usually purchasing banks) purchases usance Letters of Credit (LCs) before its maturity without recourse. The buyer discounts the account receivables and takes full risk in possible default on the receivables.

• As Off-balance sheet transactions, forfaiting does not utilize export credit limit
• 100% non-recourse. By eliminating interest rate risk, FX risk, political risk, bank credit risk, business risk and country risk, Forfaiting assists exporters in expanding business to emerging markets.
• Incorporating financing cost in sales price in advance allows easy cost control and increase in market proportion.
• Improve business opportunities in midium-high risk regions by offering longer payment terms to the importers.
• Improved cash flow is reflected in balance sheet with decrease in bank loans and account receivables, showing improved debt/asset ratio and strengthened liquidity.
• Expedite export tax refund process, saving financial

Forfaiting Arrangements

In addition to traditional forfaiting transactions under usance LCs, it can also be arranged under Standby Letter of Credit (SBLC), Document against Acceptance (DA) and other negotiable instruments denominated in USD, EUR, CNH and other major currencies. The seller only need to provide below basic information.

• Issuing Bank
• Amount
• Tenor
• Issuing Date/Date of Shipment
• Goods

Trade Finance Pro provides estimated financing cost/pricing in detail before a formal agreement being signed between the selling side and recommended potential buyer. We start process upon documents stipulated under the L/C being accepted by the issuing bank. The discounted proceeds (after deduction of interest and other relevant banking charges) are usually remitted to the seller’s designated account in three days after we receive complied documentation required under the agreement.

Factoring -“Non-Recourse Finance”

Do you have below concerns when you us Open Accounts (OA) to settle export business with foreign importers?

• Working capital pressure
• Unknown/Uncertainty to the importers’ risk
• Account Receivable Management
• Pursuing delayed payments

Factoring, a trade finance product by which Account Receivables generated from current or future sales contracts are sold to a Factor, who offers service in trade finance, sales ledger account management, account receivables collection, credit risk control, and bad debt management.