What is the difference between a bill and a forfaiting?

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The business of purchasing a usance bill or promissory note that has been accepted by the exporter and is usually guaranteed by the bank where the importer is located without recourse is called a package purchase bill, transliterated as forfaiting. At present, there is a new development of forfaiting, forfaiting business is the request of the bank receivable or bearer, without recourse, the usance bill or promissory note accepted by the bank or other banks. Bills of exchange refer to the act of financing the negotiating bank when all the positive credit documents have been submitted, but the issuing bank has not yet released the money to the negotiating bank, and the exporter is in urgent need of money, so it has the right to ask the exporter for financing so fundamentally, forfaiting is the importer's bank to purchase the bill of exchange (no recourse), and the negotiating bank purchases the L/C documents (but the negotiating bank has the right of recourse, if the issuing bank does not pay, it has the right to ask the exporter for the money back).

1. The process is different

Export Bills: The exporter submits an application for Bills Advance to the business bank according to business needs, and after the bank approves and agrees, it signs the Export Charge Summary Pledge with the exporter;

After each shipment, the exporter fills in the "Application for Export Bills", applies for financing to the bank, and submits all the documents required by the letter of credit or ** contract to the bank; The bank reviews the relevant documents and issues the mortgage remittance to the exporter; Banks send bills to the outside world to ask for remittance; After receiving the foreign exchange, it will be returned to the export bill.

Forfaiting: In the actual operation in China, the forfaiting business is very similar to the bill bill, and both have a time limit. If the payment is still not returned by the due date, the bank will extend it for 7 days, and if it is still not returned, it will be recorded as a bad record.

In addition, forfaiting cannot be repaid in advance like a bill, otherwise the bank will not be able to close the book, causing inconvenience to the bank.

2. The application procedures are different

Forfaiting application procedure: sign the import and export contract and the forfaiting contract, and at the same time the importer applies for bank guarantee; The exporter ships the goods and sends the documents and bills of exchange to the importer; The importer submits his accepted bill of exchange or promissory note to the bank for security. After the bank agrees to the guarantee, the letter of guarantee and the accepted bill of exchange or promissory note shall be sent by the guarantor bank to the exporter;

The exporter shall hand over a full set of export documents (property certificates) to the contractor, and provide the import and export contract, business license, recent financial statements and other materials; After receiving the valid acceptance from the issuing bank, the undertaker discounts the bill after deducting interest and related expenses, and pays the money to the exporter without recourse;

The purchaser will prompt the purchaser to pay the bill with the consent of the guarantor bank; The importer pays the guarantor, and the guarantor bank deducts the fee and hands over the remaining payment to the contractor.

Application process for export bills:

The enterprise shall fill in the "Application for Export Bills" and the "Pledge for Export Bills" in duplicate, affix the company's official seal and the signature of the authorized signatory, and submit them to the bank for review together with the export documents and the original letter of credit;

After receiving the Application for Export Bills and export documents submitted by the enterprise, if the conditions are met, the bank will make export bills after being verified.

3. Different objects: If an enterprise has the right to operate import and export and has an independent legal personality, and uses L/C as the method of export settlement, it can apply to the bank for export bills with the export documents under L/C.

Exporters, Importers, Contractors, Guarantors. A large forfaiting business can be formed by several contractors to form a syndicate of contractors to engage in a large amount of business together.

Export bills are the financing business for all documents under the letter of credit. After the enterprise submits the documents, it can apply for bills. The bank has the right of recourse. That is, if the L/C cannot be received, the borrower also has to repay the loan to the bank.

Forfaiting is the financing of documents under usance letters of credit. Only after the issuing bank accepts the documents, can you apply for a loan. Moreover, this loan is equivalent to the collection of foreign exchange, and the bank has no recourse.

As far as I know, there are two main differences between buyer's bills and forfaiting:

The bank after the seller's bill has the right of recourse, and the bank that does forfaiting business has no recourse.

Usually the bill under the bill of exchange has the title to the goods (such as the bill of lading), while the bill under the forfaiting may not have the title to the goods.

As for the on-balance sheet business and off-balance sheet business, it depends on whether the business handled by the bank affects its balance sheet (i.e. balance sheet), and I don't know the specific accounting items, I look forward to someone adding!

Hope it helps!

The former has recourse, so there will be receivables on the balance sheet, if there is a risk, it must first be recourse to the exporter, and the exporter cannot repay, before it is recorded as a bad debt expense to offset the receivables on the balance sheet into the income statement.

The latter is non-recourse, and when the order is paid, all the work has been completed, and the business is over, and if there is a risk, it will be directly entered into the income statement, so there is no impact on the balance sheet.

Hope it helps.

My personal understanding is that the common denominator is a means of financing under the enterprise.

In essence, these two types of business are similar to the discounting of bills.

The biggest difference between the two is whether the bank has the right of recourse, the forfaiting business bank has no recourse, the bank has not received the payment for some reasons in the future, the bank can not want to recourse to the enterprise, and the bank can recourse to the enterprise if the export bill is billed business, and the enterprise is also obliged to repay the loan, so the accounting treatment of the two is also different, the forfaiting can directly use the bank deposit to offset the accounts payable, and the interest part is included in the financial expenses. The export bill purchase enterprise should be recognized as a short-term loan or long-term loan, and after the bill is repaid at maturity, the enterprise will use the short-term loan to offset the accounts payable, and the interest part will also be included in the financial expenses. If the customer has accepted, but the letter of credit has not expired, and the enterprise has not received the payment for the time being, it can apply to the bank to do forfaiting business.