Forfeiting

Forfaiting is a technique mostly used for export transaction where the importer needs medium term post shipment financing, but the exporter cannot provide required supplier credit from his own funds and cannot take the repayment risk of the importer. It is the appropriate instrument to use for promotion of intra-regional trade in capital goods, and thus help achieve BSTDB’s mandate. BSTDB may act either as the forfaiter of the exporter or as the avalizer/guarantor of the importer, as appropriate.

Forfaiting is a proven method of providing fixed rate medium term export finance for international trade transactions in capital goods. Generally, export receivables are guaranteed by the importer’s bank. This allows the forfaiter to discount “without recourse” to the exporter, thus taking the transaction off the exporter’s balance sheet. This can have important benefits for the exporting company’s key financial ratios. Typically the importer’s obligations are evidenced by accepted bills of exchange or promissory notes which a bank avals, or guarantees.

Minimum operation size is EUR 5 million with a repayment period of 1 to 5 years. The following types of charges may apply:
  • Option fee
  • Commitment fee
  • Termination fee
  • Discount rate