INTESA SODITIC
INFORMATION REQUIRED zmarty.jpg (31726 bytes)
 
In order for Intesa Soditic Trade Finance Limited to provide an indicative quote for a transaction, the following minimum information is required:
  • Name and Country of the Importer / Buyer
  • Name and Country of guaranteeing bank
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  • Value and currency of contract
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  • Credit period and repayment structure envisaged
    •
  • Description of goods to be shipped
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  • Anticipated date when documents will be available for discount
It is important that the we are approached as soon as possible in relation to a specific transaction (preferably before the Supply Contract is signed) in order that we can provide the Exporter with detailed information in relation to the financing possibilities for the transaction under discussion. This, again, can facilitate the exporter's negotiation with the importer.
ELEMENTS OF PRICING
The costs of forfaiting are structured as follows:
  • The Discount Rate: Comprising the relevant cost of funds to the Forfaiter (which depend on the tenor, the currency and the amount involved) and a risk premium relating to the creditworthiness of the individual transaction. This rate can be expressed either as a discount to yield (which represents a true rate of interest) or as a straight discount.

 

  • Days of Grace: Calculated to reimburse the Forfaiter for anticipated delays in collecting receivables in the obligor's country.

 
  • Commitment fee: Payable in return for a binding agreement to discount receivables which will become available at a future date (i.e. after production and delivery of the goods). The commitment fee is calculated as a per cent per annum on the face value of the transaction from the date of acceptance of a firm offer to discount the transaction until the actual date of discount. The commitment fee rate depends very much on the details of each transaction, in particular the country risk concerned.
It is obviously vital to the exporter that the proceeds of the discount provide sufficient funds to cover their production costs and required profit margin. Intesa Soditic Trade Finance Limited is able to calculate the required face value of the transaction in order to achieve this.
DISCOUNT CALCULATIONS
In Forfaiting the interest cost payable by the exporter normally takes the form of a discount for the entire period of credit involved and is deducted by the forfaiter from the face amount of the Promissory notes or Bill of Exchange before payment to the exporter.
The discount rates are usually based on London Inter-Bank Offered Rates (LIBOR) for the period of credit and repayment schedule involved, together with an appropriate margin covering the risks assumed by the forfaiter.

The two main methods of discounting are as follows: -

  • Discount to Yield – expresses the discount rate as a true interest cost, on a per annum basis.

Interest Rate x No. of Days + 1  = Divisor

  100 x 360

Face Value  = Net Proceeds

  Divisor
  • Straight Discount – expresses the discount rate as a percentage discount from the face value based on the specific maturity or maturities.

Interest Rate x Face Value x No. of Days  = Discount Charges

  100 x 360
Face Value - Discount Charges = Net Proceeds