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Forfaiting

Purchase export receivables without recourse. The forfaiter assumes all payment and political risks.

Trade Finance
Complexity
Intermediate
Deal Size
$5M - $200M
Typical Tenor
2-5 years
Scalability
High
#trade-finance#export#receivables#without-recourse#emerging-markets
Mini Map

Flow Types

Cash
Securities
Guarantee
Receivables

Transaction Timeline

Phase 1: Trade Transaction(T+0)

Exporter ships goods, receives promissory notes with bank guarantee (aval).

Use Cases

  • •Export financing for capital goods and equipment
  • •Convert trade receivables to immediate cash
  • •Eliminate buyer credit risk from balance sheet
  • •Finance sales to emerging markets
  • •Avoid political and transfer risks

Problem Solved

Exporters get immediate payment and eliminate credit/political risk. DFI earns spread and promotes trade.

Revenue Calculator

Model deal economics

$25M
$5M$200M
150 bps
5 bps200 bps
10 bps
55 bps

Projected Revenue

Gross Carry Income$187,500
Funding Cost($12,500)
Net Carry$175,000
Upfront Fees$137,500
Total Revenue$312,500
Annualized Return
250.0 bps
If Repeated Annually
$625,000

Revenue Sources

Carry Income

Discount Margin50-150 bps

Spread between discount rate and funding cost

UpfrontPresent Value Discount - Cost of Funds
Collection Spread100-300 bps

Difference between face value received and purchase price

At MaturityFace Value - Discounted Purchase Price

Fee Income

Commitment FeeOne-time
25-50 bps

Fee for committing to purchase before shipment

Documentation FeeOne-time
10-25 bps

Fee for legal and documentation work

Regulatory Checkpoints

Without Recourse ConfirmationURC 522 / Local Law

Must confirm true sale without recourse for balance sheet treatment.

⚠️ Critical for balance sheet derecognition

AML/KYC on All PartiesFATF Guidelines

Full due diligence on exporter, importer, and guarantor bank.

Risk Flags

Political/Country RiskHigh

Importer country may impose capital controls or face instability

Mitigation:Country limits, political risk insurance, ECA guarantees
Guarantor Bank RiskMedium

Guarantor bank may fail or refuse to honor guarantee

Mitigation:Only accept guarantees from investment-grade banks, confirm aval validity
Documentation RiskMedium

Invalid or unenforceable promissory notes or guarantees

Mitigation:Legal review in all jurisdictions, use standard ICC forms
Currency MismatchMedium

Notes denominated in volatile local currency

Mitigation:Prefer hard currency (USD/EUR), hedge FX exposure if needed