London Forfaiting - International Trade Club
Transcript of London Forfaiting - International Trade Club
Ian Lucas
Head of UK Marketing
Agenda
LFC & FIMBank
Forfaiting Opportunities
Country Lists
What is Forfaiting?How does it work?DocumentationProductsAdvantagesMethod
Forfaiting
What is Forfaiting?
Basics of Forfaiting
Forfaiting is the discounting of international trade receivables on a
“Without Recourse” basis
A form of supplier credit
What is Forfaiting?
There are no official statistics on the actual size of the Forfaiting Market
However, is has been estimated that volumes could be as high as:
US$30 billion of new business per annum; and
US$60-75 billion outstanding at anyone time
Forfaiting Market
6. Exporter delivers documents to the Forfaiter1. Forfaiter commits to purchase deal from the Exporter
1.Forfaiter commits to purchase deal from the Exporter
Commercial contract between Exporter and Importer
2.
2. Commercial contract between Exporter and Importer
3.
Delivery of goods from Exporter to Importer
3. Delivery of goods from Exporter to Importer
4.Bank gives guarantee
4. Bank gives guarantee
5.
Importer hands over documents to Exporter
5. Importer hands over documents to Exporter
6.Exporter delivers documents to the Forfaiter7.
Forfaiter pays cash ‘without recourse’to the Exporter
7. Forfaiter pays cash ‘without recourse’ to the Exporter
8.
Forfaiter presents documents to Bank at maturity for payment
8. Forfaiter presents documents to Bank at maturity for payment
9.
Importer repays Bank at maturity
9. Importer repays Bank at maturity
10.Bank repays Forfaiter at maturity
10. Bank repays Forfaiter at maturity
How does Forfaiting Work?
Pricing ComponentsDiscount Rate (Interest Rate)► Credit Rating – Country/Guarantor► Availability (Country & Bank Limits)► Cost of Funding
Commitment FeeOther Fees/Grace Days
How does Forfaiting Work?
Acceptance of Bill of Exchange by Importer/Buyer
Issuance of Promissory Note by Importer/Buyer
Letter of Credit
Book Receivables
Lease Receivables
NEGOTIABLE INSTRUMENTS
Documentation
Building Projects
(Hotels, Hospitals etc.)
Trucks
Machinery
Construction Equipment
Commodities
(Oil, Grain etc.)Soccer Players
Products financed by Forfaiting
Transaction Characteristics
Tenors 1 month to 10 years Amounts US$100,000 to US$200 millionAll major currencies No recourse to exporter / endorserFixed rateOften guaranteed for payment on maturity by a foreign bank (Importer’s Bank) or Sovereign
Advantages of Forfaiting
Finances 100% of the contract valueEnables Exporter to offer credit termsSale is made on a without recourse basisFinancing is off balance sheetSimple DocumentationQuick DecisionsImproves Cash FlowServices, Foreign and Local works can be financedNo restriction on country sourcing
Forfaiting: Working Together
Exporter identifies potential project to be financed by LFCLFC advises alternative solutions/structures for financing Exporter/LFC work together to achieve best financing solution for Exporter/BuyerExporter concludes sales contract with buyerSimultaneously Exporter concludes financing contract with LFCExporter delivers goodsSimultaneously LFC pays cash without recourse to Exporter
About LFC & FIMBank
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Global Trade Review
Ian Lucas
Head of UK Marketing
London Forfaiting Company Ltd
6. Exporter delivers documents to the Forfaiter1. Forfaiter commits to purchase deal from the Exporter
1.
2.
2. Commercial contract between Exporter and Importer
3.
3. Delivery of goods from Exporter to Importer
4.
4. Bank gives guarantee
5.
5. Importer hands over documents to Exporter
6. 7.
7. Forfaiter pays cash ‘without recourse’ to the Exporter
8.
8. Forfaiter presents documents to Bank at maturity for payment
9.
9. Importer repays Bank at maturity
10.
10. Bank repays Forfaiter at maturity
How does Forfaiting Work?