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An Export Finance Option
FORFAITING
# By discounting export
receivables.
# Evidenced by bills
of exchange or promissory notes.
# Without recourse
to the seller(export)
# Carry medium to
long term maturities.
# On a fixed rate
basis (discount).
# Upto 100 percent
of the contact value.
WHAT
BENEFIT ACCRUE TO AN EXPORTER FROM FORFAITING
# Converts a deferred payment export into a cash transaction,
improving liquidity and cash flow.
# Frees the exporter from cross – border political or commercial
risks associated with export receivables.
# Finance upto 100 percent of the export value is possible as
compared to 80 – 85 percent financing available from conventional
export credit programmes.
# As forfeiting offers without recourse finance to an exporter,
it does not impact the exporter, it does not impact the exporter’s
borrowing limits. Thus, forfeiting represents an additional
source of funding, contributing to improved liquidity and cash
flow.
# Provides fixed rate finance; hedges against interest and exchange
risks arising from deferred export credit.
# Exporter is freed from credit administration and collection
problems.
# Exporter saves on insurance costs as forfeiting obviates the
need for export credit insurance.
# Simplicity of documentation enables rapid conclusion of the
forfeiting arrangement.
INTERNATIONAL FACTORING
Credit Protection & Management
Factoring provides a credit guarantee against the financial default of the buyer, under which payment is made automatically 90 days after buyer default without a formal claim procedure.
Finance
Finance is made available up to 90% of the invoice value, on shipment to approved debtors, against submission of invoice and shipping documents.
Collection Service
Factor assume responsibility for collection of receivables covered by the factoring arrangement. This includes follow up for payments not received on due date.
BENEFITS TO EXPORTERS
No administration hassles
As payment are normally made to the local Factor, they can made by way of cheques or bank transfers. No overseas remittances have to be effected.
Local contracts to resolve administration issues
Buyers benefit from the presence of local Factors who can be easily accessed. Factoring enables the exporter to meet buyer requirements without compromising on the security of the payment.