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Forfaiting Rate Calculator
Discount receivables (avalised drafts, deferred LCs, promissory notes) on a without-recourse basis. Applies banker's discount, commitment fee and documentation cost to derive net proceeds and effective yield.
| Face value | $1,000,000.00 |
| − Discount (7.5% × 180/360) | −$37,500.00 |
| − Commitment fee | −$416.67 |
| − Documentation fee | −$1,500.00 |
| = Net proceeds | $960,583.33 |
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Overview & methodology
How are forfaiting proceeds calculated?
Forfaiting discount formulas
Discount = face value × discount rate % / 100 × actual tenor days / basisCommitment charge = face value × commitment rate % / 100 × commitment days / basisNet proceeds = face value - discount - commitment charge - documentation feeThe basis is the site's currency convention, not a rate or day-count prescribed by URF 800. Confirm contractual terms.
| Currencies | Site convention | Time fraction |
|---|---|---|
| USD, EUR | ACT/360 | Actual days ÷ 360 |
| CHF, AED, SAR | ACT/360 | Actual days ÷ 360 |
| CNY, JPY | ACT/360 | JPY uses international Euroyen convention |
| GBP, INR | ACT/365 | Actual days ÷ 365 |
| AUD, CAD | ACT/365 | Actual days ÷ 365 |
| HKD, SGD | ACT/365 | Actual days ÷ 365 |
India - EPM Niryat Protsahan: interest support on export factoring (TN 25/2025-26, amended by TN 32/2026-27 of 26 Oct 2026); exporters are identified by IEC (no UIN); eligibility by EGM date, for exports on or after 20 Feb 2026.
Forfaiting: True Sale of Trade Receivables
Forfaiting is the purchase of a trade receivable (typically an avalised draft, deferred LC, or promissory note) on a without-recourse basis. This means the forfaiter assumes all credit and political risk-if the buyer defaults, the forfaiter eats the loss, not the exporter. In exchange, the exporter receives immediate cash at a discount. The discount rate depends on the tenor, the country risk of the buyer/guarantor, and the quality of the aval or guarantee backing the receivable.
Banker's Discount vs. Effective Yield
Forfaiters quote a discount rate that is applied upfront to the face value (banker's discount). The effective yield (also called the "true rate of return") is higher than the quoted discount rate because the interest is deducted upfront. For example, a 7.5% discount on a $1M 180-day receivable costs $37,500 upfront, but the forfaiter only advances $962,500, so the true yield on that $962,500 is approximately 7.8% per annum. Always compare forfaiting quotes by effective yield, not the discount rate.
Numerical Example: Forfaiting Yield Calculation
Illustrative USD example on ACT/360, excluding commitment and documentation fees; the quoted rate is not a market quote. This is banker's discount convention. Always ask for the 'effective yield' when evaluating forfaiting proposals from multiple banks.
What instruments qualify for forfaiting?
Receivables must be backed by a bank aval (bank's guarantee/acceptance) or an SBLC (Standby Letter of Credit) for the forfaiter to purchase without recourse. Common instruments include: avalised bills of exchange (typically 60 to 180 days), deferred LCs (payment terms), promissory notes (if avalised by a bank), and demand guarantees (URDG 758). The aval/SBLC must be from a bank in a recognized market (OECD, or approved emerging market) for the forfaiter to price it competitively.
Commitment fees and documentation charges
Beyond the discount, forfaiters also charge a commitment fee (typically 0.25 to 0.5% p.a.) if they have committed funds to your deal but the receivable hasn't yet been presented. They may also charge documentation fees (indicatively $500 to $2,000 per deal) for legal review of the aval/SBLC terms. These are one-time costs, not recurring, but they add up in multi-deal programs. Always ask your bank for an all-in quote that itemizes all fees.
When is forfaiting used?
Forfaiting is ideal when you've given extended payment terms (typically 60 to 180 days) to a buyer in a slightly riskier market (Eastern Europe, Southeast Asia, Middle East) but you need immediate cash to pay your suppliers or fund working capital. It's more expensive than a traditional bank loan (because of credit risk) but cheaper than factoring (which indicatively takes 5 to 10% of invoice value). Forfaiting is a mature trade finance product used primarily by exporters in Asia, Europe, and the Americas.
Related tools: Compare against the Usance LC Interest Calculator for discounting under LC cover, or the SBLC Fee Estimator to understand the cost of the bank guarantee backing your forfaited receivable.
Method note: calculations run in your browser using the formulas and published rule books cited on this page. Results are free estimates for planning, with no login required, and should be confirmed with your bank, broker or the official source before you commit.
Frequently asked questions
What is forfaiting and how does it differ from factoring?
Forfaiting is the without-recourse purchase of medium-term export receivables (usually bills of exchange or promissory notes backed by an aval or LC). Factoring is typically short-term, with recourse, and covers open-account receivables. Forfaiting shifts credit, transfer and political risk to the forfaiter.
How is the forfaiting discount rate quoted?
As a straight discount or discount-to-yield over the reference rate (SOFR, EURIBOR, SONIA) plus a margin covering country and bank risk (typically 100–400 bps). Days are counted ACT/360 for USD/EUR, ACT/365 for GBP.
What documents does a forfaiter need?
Typically the avalised bills of exchange or promissory notes (or an LC with deferred payment undertaking), the commercial contract, shipping documents, an assignment of proceeds and KYC on the exporter. Without a bank aval or confirmed LC most forfaiters will not price the paper.