•
despite offering deferred-payment terms, the exporter receives the discounted value of the receivable immediately following performance, thereby improving its liquidity;
•
eliminates the risk to the exporter of non-payment by the buyer, or the political risk of the buyer’s country;
•
relieves the exporter of exchange rate and interest rate risks.
Benefits for the buyer: •
alternative form and source of financing;
•
expands and broadens opportunities to obtain credit;
•
predictable financing costs.
Eximbank only performs forfaiting and the discounting of receivables arising from supplier’s credit. It does not enter into factoring arrangements; that is, it does not undertake the discounting without recourse, under a framework agreement, of a high number of low-value receivables originating from an exporter’s deliveries made under an open supply arrangement. B.1.
Discounting of Supplier’s Credit
This classic export post-financing facility offered by Eximbank involves the purchase of export receivables originating from supplier’s credit. The discounting of receivables originating from supplier’s credit provided to the buyer by the exporter on the basis of a commercial contract is usually secured with a MEHIB insurance policy (type S). Credit amount: Typically a minimum of EUR 1 million. In transactions exceeding an amount of EUR 20 million, Eximbank usually provides the credit in a co-financing arrangement with the involvement of commercial banks. Eximbank participates in the financing of transactions of less than EUR 1 million on an ad-hoc basis, mainly in relation to transactions that are important for their reference value. Currency: EUR or USD. Tenor: Maximum 10-12 years, depending on the terms and conditions of the related commercial agreement. Tenor of less than two years is also available, for the funding of agricultural or relatively small-value manufacturing industry export transactions. B.2.
Forfaiting
Besides its range of “classic” export credit-agency financing facilities, Eximbank offers an alternative solution in the form of its forfaiting product. Forfaiting involves the purchase, without recourse, of export-derived receivables guaranteed by a bank. This effectively turns a deferredpayment transaction into a prompt-payment transaction, thus relieving the exporter of the •
commercial,
•
country (i.e. political and transfer),
•
exchange rate, and
•
collection risks associated with the receivable.
Instrument: The export receivable must, without exception, be a receivable that is embodied or guaranteed by one of the following unconditional, irrevocable banking instruments: •
deferred-payment letter of credit,
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