Forfaiting – Finance without Recourse
Forfaiting
– “Finance without recourse”
Do you have the following concerns when you export to overseas markets?
- Delayed payments
- Unknown/Uncertainty of the country risks
- Lengthy process of export-tax refund
- Foreign Exchange (FX), political, business risks
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Forfaiting Benefits
Forfaiting, a trade finance product by 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 transaction, 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 costs.
Forfaiting Arrangement
Both importers and exporters determined to us LC to settle the transaction, then contact OTFC to provide below basic information.
- Issuing Bank
- Amount
- Tenor
- Issuing Date/Date of Shipment
OTFC 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.
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