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Forfaiting

-a without-recourse financing to thoroughly improve the cash flow of the exporter.

What―What is forfaiting?

·         Forfaiting, also called bill buy-up or bill buy-out, is a kind of trade financing that Bank of China, as the buyer-up, purchases without recourse from the exporter the accepted usance draft so as to provide finance to the exporter.

Why―Why choose forfaiting?

·         100 percent financing-Without recourse and not occupying exporter's credit line. That is to say once the exporter obtains the financed fund, he will be exempt from the responsibility to repay the debt;

·         Improve cash flow-receivables become current cash inflow and it is beneficial to the exporter to improve financial status and liquidation ability so as to heighten further the fund raising capability;

·         Save administration cost- by using forfaiting, the exporter will spare from the management of the receivables. The relative costs, as a result, will be reduced greatly;

·         Advanced tax refund-using BOC forfaiting service, the exporter can make the verification of export and thus get the tax refunded in advance just after financing;

·         Evade various risks-forfaiting business enables the exporter to transfer various risks resulted from deferred payment, such as interest-rate risk, currency risk, credit risk and political risk;

·         Increase trade opportunity-with forfaiting, the export is able to grant credit to his buyer freely, and thus, be more competitive in the market;

·         Realize price transfer-the exporter can also transfer the corresponding financing cost into the sale price.

When―When to use forfaiting?

·         To improve financial status and want to thoroughly remove the export receivables from the balance sheet;

·         In case of other investment opportunity before the receivables get paid and the expected returns is higher than all the forfaiting charges;

·         In case of short of working capital and other types of financing on a recourse basis are not preferable.

How - How to handle the forfaiting operation?

·         The Operation flow

Forfaiting

·          Points for Attention

1.     Present documents to Bank of China and forfaiting contract signed by both parties; Bank of China and the exporter are required;

2.     Select a bank good credit standing as the issue/confirming so as to benefit from forfaiting service and gain a preferable financing interest rate;

3.     Under deferred payment L/C, confirmed maturity date and acceptance by the issue bank are required;

4.     Under collection, the draft is in need to be signed and accepted by proper bank;

5.     Forfaiting business is applicable to not only large capital transactions but also small transactions, but the less the amount is, the higher the financing cost will be, the client should weight the financing cost and facility brought about by forfaiting business;

6.     In accordance with international convention, in the following cases, the financing bank may reserve its recourse: a) Due to stop payment order received, the issue bank fails to repay the matured bill; b) The export merchant is suspected of being involved in cheating.  

Advantages of Bank of China

·         Predominant reputation —— BOC has a long history of over 90 years and has been awarded “the Best Bank in China” by “Euromoney” for successively 8 times. With the progressively improved system of corporate governance, overall integration of operation flow, wholly-upgraded service efficiency and rich financial products, BOC has continued to advance toward its goal of becoming a leading universal international bank;

·         Reform with keen determination —— Bank of China has always paid much attention to the intermediate businesses, especially the strategy of developing various trade financing.

·         First-class professional services —— the first bank in China to start forfaiting businessBank of China has absorbed a pool of talented experts

·         Abundant capital —— Bank of China, with the strongest foreign exchange power and a continually enhanced RenMinBi capital power, provides clients robust guarantee to carry out forfeiting service successfully.

·         Preferential price —— Provide the most beneficial financing plan as per the interest rate on the market, help the clients lower the financial expense to the largest extent.

·         Strong credit support —— Bank of China, the first bank among domestic commercial banks to implement the centralized credit management, has designed diversified and effective credit process to support financing businesses;

·         Rich products —— Full range of without-recourse financing products under usance L/Cdeferred payment L/C and collection are provided to satisfy your extensive demands.

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