What is Forfaiting and whats goods are suitable for Forfaiting ?

Forfaiting is the without recourse finance of international trade receivables,based on Letters of Credit, Letters of Guarantee, Bills of Exchange and Promissory Note. Basically any goods can be financed, from commodities to chemicals to motorcycles to machinery (as examples).

What is the role of CTS in a forfaiting transaction?

CTS is the mediator between the exporter / exporter's bank and various other banks / investors worldwide. CTS facilitates the entire transaction from obtaining a price quotation and assisting in documentation up to communication with the buyer. CTS is not financially involved in any deal and will receive a fee for its advisory services.

When should an exporter or his bank contact CTS ?

At any given time during the transaction. However, the earlier, the better,as CTS can then advise on bank and country risk.

How can the exporter / exporter's bank be certain that financing is in place ?

CTS will contact buyers of the exporter's receivables. Once the transaction is confirmed, the buyer will send a written confirmation which is a legally binding contract.

How long does it generally take CTS to indicate interest in a transaction?

Usually CTS will reply within 24 hours after receiving the details on any potential transaction.

What percentage amount of the receivable can be financed ?

Forfaiting allows for 100% financing of the receivables face value.

What happens if the importer does not pay its debt at maturity?

Forfaiting is 100% without recourse (unless deliberate fraud is involved),and as such,the exporter is not responsible for repayment at maturity.

When does an exporter get paid and what is the price of forfaiting?

The exporter will get paid after the Letter of Credit has been accepted by the Issuing Bank and all documentary requirements of the buyer have been fulfilled.In usual cases that means about 3 - 4 weeks after shipment has taken place.

The price will very much depend on the underlying bank and country risk, as well as on amount and lifetime. Please do check with us on a case by case basis.

Why should an exporter forfait bank guaranteed receivables?

All the risk associated with the payment of such transaction at maturity, i.e. bank risk, country risk, transfer risk and exchange rate risk will be taken by the buyer of such transaction. The exporter will receive cash, enabling him to further use such money and to improve his balance sheet.

What is the minimum size and tenor for a transaction ?

Usually around USD 100,000.00 and at least 60 days, otherwise the cost is usually too high. However, smaller deals can be considered case by case

What is the minimum fee for a transaction ?

It depends on who the buyer is of a transaction. Thelowest minimum fee is about Libor + USD 500.00

Can Letters of Guarantee, Promissory Notes, Bills of Exchange be used for forfaiting ?

Depends on who the guarantor or issuer is, but basically yes

We are only allowed to deal with banks for trade finance, not with companies

Our clients will deal directly with a bank, we just find a buying bank for the receivables for them. All documents and contracts to be signed directly with the buying bank.

Is Cuba a country which is doable ?

Yes, but only for certain banks and with certain restrictions. Please contact us for more details.

Are Letter of Credit available by deferred payment (as opposed to available by negotiation or acceptance?) suitable for forfaiting ?

It depends on who the final buying bank of the receivables is, many buyers dont mind, but some cant accept it.

Are sight Letters of Credit or D/P (documents against payment) suitable for forfaiting ?

No, as both are payable at sight, there is no financing period

Are D/A transactions (documents against acceptance) and corporate risk (not bank guaranteed) acceptable ?

It depends on which corporate is the guarantor / obligor. Usually, the company should be a listed company, so that financials are easily obtaineable, or a subsidiary of a state owned company, or a large state owned company in order to make it feasible.

What is the workflow of a typical transaction ?

  1. client advises details of a transaction (i.e.country, bank, amount, tenor, goods)
  2. we check with our counterparties for interest
  3. we advise price to client
  4. if client accepts, buying bank will send purchase confirmation
  5. client prepares all required docs (we can help)
  6. client sends all docs to buying bank
  7. once buying bank has received satisfactory docs, they will pay to client

China Trade Solutions Ltd. Shanghai Representative Office

No.2801-28, 28/F, Shanghai World Financial Center, 100 Century Avenue, Pudong, Shanghai 200120

Official Account