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Forfeiting


 

Under a forfeiting arrangement, Bank of China (Canada) purchases the outstanding claims resulting from goods, services or capital goods transactions without recourse to the client. Usually such outstanding claims have been accepted/avalized to make payment by financial institutions.

Application

Forfeiting enables a client to receive non-recourse payments at a fixed rate and without sub-allocating the client’s credit line to this financing. This enables the client to mitigate risk, increase cash flow, improve financial statements and, in some cases, expedite tax rebates. Forfeiting can take the following forms:

1. Usance L/C forfeiting

Bank of China (Canada) purchases non-recourse outstanding accounts receivable confirmed/avalized by the issuing bank in terms of a negotiated, accepted or deferred payment L/C.

2. Sight L/C forfeiting

Using a sight negotiable L/C, Bank of China (Canada), as the nominated negotiating bank, purchases accounts payable of the issuing bank without recourse as long as documents are consistent with L/C terms.

3. Forfeiting under D/A

Under D/A (documents against acceptance) Bank of China (Canada), at the customer's request, purchases accepted commercial drafts avalized by a bank without recourse.

Features

• The client sells accounts receivable to Bank of China (Canada) without recourse.

• The products allows clients to transfer such risks as sovereign, credit, exchange rate and interest rate risk to Bank of China (Canada).

• The client is able to free up its credit line with the Bank as forfeiting does not require sub-allocation of a credit facility. Moreover, a client can obtain financing from Bank of China (Canada) under forfeiting without having a credit facility in place.

Who can benefit from this product?

• Clients who have limited working capital and need to accelerate the turnover rate of their accounts receivable.

• Clients who seek to mitigate credit, sovereign, interest rate and exchange rate risks underlying longer-term accounts receivable.

• Clients who have insufficient or no credit lines with banks.

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