Forfaiting

Product descriptions

Forfaiting refers to the unexpired claims arising from the Bank’s purchase of goods, services or assets without the right of recourse. Generally, the claim has been accepted/committed/certified by a financial institution. The acceptable forms of claims for the Bank’s forfeiting transactions include: L/C, bill of exchange, promissory note, claims guaranteed by payment guarantee/standby letter of credit, claim for insurance of export credit insurance and other acceptable debt instruments.

Product functions

Forfaiting provides customers with the non-recourse buyout without occupying the credit line of customers, which can effectively meet the various requirements of customers such as avoiding risks, increasing cash flows, improving financial statements, and obtaining the tax refund after write-off beforehand. At present, the Forfaiting services are available in the Bank:

1. Forfaiting under usance L/C.

It refers to that the Bank purchases the forward receivables accepted/committed by the issuing bank without right of recourse under the usance negotiation, usance acceptance or deferred payment L/C.

2. Forfaiting under sight L/C.

It means that, under the sight negotiation L/C, the Bank is the designated negotiating bank or the L/C is for free negotiation. Under the condition of strict examination of documents and ensuring the consistency between documents and bills, the amounts payable of the issuing bank are bought out at the request of the customer.

3. Forfaiting under credit insurance.

It refers to that for the export trade with export credit insurance has been bought, the Bank has provided the unmatured claims which are bought without right of recourse for the customer, based on the documents, relevant certificates for the export credit insurance, and the compensation transfer agreement provided by the customer.

Product features

1. Buy out without recourse. The Bank has no right of recourse to buy out the accounts receivable, so that customers are free from the fear of being the subject against which the recourse is made.

2. Avoid all kinds of risks. The customer transfers the country risk, buyer's credit risk, exchange rate risk and interest rate risk to the bank, so as to prevent risks.

3. The credit line of customers will not be necessarily occupied. Forfaiting does not occupy the credit line of customers, and customers may still obtain financing from the bank if there is no credit line or the credit line is insufficient.

4. Increase working capital. The customer gets 100% financing, convert future accounts receivable into current cash inflow, avoid capital occupation and increase cash flow.

5. Optimize financial statements. Customers may reduce accounts receivable, improve cash flow and optimize financial statements without increasing bank liabilities.

6. Obtain export tax rebate in advance. According to the regulations of the State Administration of Foreign Exchange, customers may obtain export write-off and tax refund in advance when handling the forfaiting transaction, so as to save financial costs.

Terms

Short-term financing of less than one year may be available, and moreover, medium and long-term financing of 3-5 years or even longer can also be offered.

Applicable customers

1. Due to the limited liquidity of the customer, it is necessary to speed up the turnover of accounts receivable.

2. The customer wishes to avoid the credit risk, national insurance, interest rate risk and exchange rate risk existing in the forward collection.

3. The customer’s credit line is insufficient, or there is even no credit line.

4. The customer wishes to get export tax refund and write-off in advance.

Handling process

1. The customer signs the Forfaiting Service Contract with the Bank.

2. The customer submits the Application for Forfaiting Service.

3. After obtaining the credit line to the debtor or confirming the resale, the Bank signs the Forfaiting Service Confirmation with the customer.

4. Assignment of claims. In case the customer holds the bill, the customer shall endorse the bill to the Bank. If the bill is unavailable, the customer should sign the Assignment Letter.

5. Discount payment. After obtaining the acceptance/commitment notice from the issuing bank/designated bank under the L/C, or other claim certificates acceptable to the Bank's requirements, the Bank will pay the amount net of the discount interest and related expenses to the customer.

6. Under the export trade, the Bank will issue a special copy of write-off of export exchange collection to the customer for timely handling of write-off and refund of export exchange collection.

Reminders

1. The claims related to the forfaiting services shall be legal, true and effective without any mortgage or pledge;

2. Under the mode of L/C and collection settlement, forfaiting will become more convenient when documents and bills are submitted through Fudan bank.

3. Choosing an issuing bank or accepting/committing bank with good credit is conducive to obtaining favorable financing interest rate;

5. In the early stage of the service, Fudan Bank may provide consulting services and undertake to buy your unexpired claims according to the established price and conditions in a certain period of time in the future. In this case, depending on the length of the commitment period, you may need to pay some commitment costs.