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Forfaiting

Name

Forfaiting

Introduction

Forfaiting means that Bank of China purchases the outstanding claims resulted in goods, services or asset transactions without recourse. Usually the outstanding claims have been accepted/honored/guaranteed by a financial institution. The acceptable types of outstanding claims in forfaiting by Bank of China include: L/C, bills of exchange, promissory notes, outstanding claims guaranteed by payment guarantee/standby L/C, outstanding claims guaranteed by export credit insurance, outstanding claims guaranteed by international organizations such as IFC (International Finance Corporation), and other acceptable credit instruments.

The forfeiting type acceptable by Bank of China Brussels Branch is forfaiting under usance L/C, namely, the Branch purchases non-recourse outstanding accounts receivable confirmed/honored by the issuing bank under the negotiation, acceptance or deferred payment L/C.

Functions

Forfaiting business enables a customer to receive non-recourse payments with fixed rate without taking up its credit line, so that it can meet the customer's needs in avoiding risks, recovering funds, improving financial statements and receiving early tax rebates.

Features

1. Purchase without recourse. The Branch purchases the receivables without right of recourse, enabling customers to collect the receivables as soon as possible.

2. Mitigate risks. Customers transfer such risks as nation risk, credit risk, exchange rate risk and interest rate risk to Bank of China with the purpose to mitigate risks.

3. No credit line of customer will be occupied. Forfaiting doesn't occupy the customer's credit line, customer can get financing from Bank of China even when it has no or insufficient credit line.

4. Timely recovering of funds. Customers can obtain 100% of financing, turning the future accounts receivable into current cash flows to recover fund and avoid fund occupation.

5. Improvement to financial status. Customers can reduce accounts receivable and improve cash flows without increasing bank loans, improving financial status.

Target Customers

1. Customers who have limited working capital and need to accelerate turnover rate of accounts receivable;

2. Customers who want to mitigate the credit risk, nation risk, interest rate risk and exchange rate risk faced by the long-term accounts receivable;

3. Customers who have insufficient credit line or no credit line with banks.

Procedure

1. The customer submits to Bank of China Brussels Branch a Forfaiting Application Form.

2. Bank of China Brussels Branch signs Forfaiting Confirmation with the customer after obtaining the debtor's credit line or confirming transfer of outstanding claims.

3. Transfer of debt right. If the customer holds debt right bill, it may transfer the bill to the Branch by endorsement; if the customer can not obtain debt right bill, it may sign Debt Right Assignment with the Branch.

4. Make discount payment. Upon receipt of acceptance/honoring advice of the issuing bank/nominated bank under the L/C or other certificates of debt right in line with the requirements, Bank of China Brussels Branch pays the customer the net proceeds after deducting discount interest and related fees;

Tips

1. The debt right related to forfaiting business should be legal, authentic, valid and contain no  mortgage or pledge;

2. Under L/C and collection, it is simpler to handle forfaiting service by presenting documents through the Branch;

3. Under the D/A collection, the draft should be guaranteed or provided with guarantee by a bank;

4. Selecting an issuing bank or an accepting/undertaking bank with good credit standing is conducive to obtaining preferential rate;

5. Before the start of the transaction, Bank of China Brussels Branch can provide comprehensive consulting services, design personalized financing solutions for customers, and commit to buying customer's mature debt right time in future at the agreed price and terms. In this case, customer may be required to pay certain amount of commitment fee depending on the duration of commitment period;

6. For details about forfaiting under sight L/C, forfaiting under D/A bank guarantee, purchase of receivables guaranteed by L/G, forfeiting under L/C, and forfeiting guaranteed by IFC and other international organizations, please call the service line of the Branch.

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