LC Forfaiting

Letter of Credit (L/C) forfaiting allows an exporter to receive up–front payment for selling L/C–based receivables at a discount on a non–recourse basis.

The exporter seeking to hedge the insolvency risk of the L/C issuing bank and the country risk of the importer and receive payment upfront may approach an advising bank to purchase the L/C–based receivables at discount, giving up the right to collect full payment in the receivables to the said bank.

Benefits of L/C Forfaiting

Risk hedging

  • Reduce non-payment risk while increasing the transaction volume with the importer under flexible payment terms
  • Shift insolvency risk of the L/C issuing bank to the advising bank

Improving balance sheets

  • Optimize balance sheets by taking the receivables off the balance sheet (please consult with your professional accountant)

Reducing management burden

  • Reduce the burden of collecting the receivables from the importer

Increasing competitiveness

  • Allow for prolonged or flexible payment terms for competitiveness, while reducing payment risk of importer.

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