Discounting

Letters of Credit - Trade Services - Discounting - Forfaiting

For international clients Maxiplan is able to assist with financing against various types of financial instruments, mostly Letters of Credit but also Promissory Notes, Bills of Exchange, some Shares, Investment Grade Rated Government and Corporate Bonds, etc...

Most commonly we would discount letters of credit received by exporters from their buyers. Many times such letters of credit, whilst providing payment guarantee, offer deferred payment to the exporter or Beneficiary as the exporter would be referred to in the letter of credit. In such cases Maxiplan is able to provide immediate cash at discount to the full value of letters of credit. In effect the exporter receives the cash immediately whilst Maxiplan receives payment from the issuer/buyer on the due date which is from a couple of weeks to a a few months from the issue date. Discount represents interest plus margin.

Discounting is also known as Forfaiting, the term generally used to denote the purchase of obligations falling due at a fixed future date without recourse to any previous holder of the obligation. The word comes from the French "à forfait" and thus conveys the idea of surrendering rights, which is of fundamental importance in forfeiting. Basically forfaiting is discounting without recourse.

In addition, Maxiplan is able to assist international clients with other services related to letters of credit such as transfer, assignment of proceeds and in some cases back-to-back letters of credit.

For more information click on the following links:

Guide to Import Documentary Credits

Guide to Export Documentary Credits

Glossary of Trade Terms