Letter of Credit Discounting without recourse (Forfeiting)
To accelerate cash flow and reduce debt
- ①Your company (Supplier) enters into contract with Buyer.
- ②Buyer requests L/C issuance to Issuing Bank.
- ③L/C Issuing Bank opens L/C.
- ④SMBC advises L/C to the Supplier.
- ⑤Supplier (Your company) ships the goods and receives Bills of Lading from shipping company).
- ⑥Supplier (Your company) delivers shipping documents including B/L to SMBC.
- ⑦SMBC presents documents to L/C Issuing Bank.
- ⑧Issuing Bank sends acceptance advice to SMBC.
- ⑨SMBC makes discounted payment to your company.
- ⑩L/C Issuing Bank makes payment at maturity.
- ・Supplier gets paid early (without recourse) based on L/C and acceptance from Issuing Bank
- ・Additional assured source of potentially cheaper financing.
- ・Help obviate the need for currency hedging
- ・Potentially “Off-Balance Sheet” for Supplier subject to approval of certified accountants/auditors.