Foreign Bill Discounting

What is Foreign Bill Discounting?

A facility granted by the Bank to its customers (exporters) in which the Bank purchases, with recourse, a customer’s sight export documents or discounts usance export documents.

FBP/D under Documentary Credit or Documentary Collection is a facility granted by the Bank to its customers (exporters) in which the Bank purchases, with recourse, a customer’s sight export documents or discounts usance export documents.

Target Customers

Exporters have limited working capital, they have to develop business through rapid capital turnover;
Exporters encounter temporary difficulty in capital turnover between receipt of acceptance/confirmation/guarantee of payment from foreign banks and collection.
Exporters discover investment opportunities between receipt of acceptance/confirmation/guarantee of payment from foreign banks and collection, and the yield is higher than the discount rate.

Benifits of bill discounting

Acceleration of capital turnover. Get the fund immediately, so that capital turnover can be accelerated and financial pressure can be eased.
Simplification of financing procedures. Financing procedures are more convenient when compared with those for working capital loans.
Less financial expenses. The customer can choose the funding currency in accordance with the interest rates of different currencies in Bank of China, so as to minimize the financial expenses.

Points to remember

Exporters should agree with the importer to take the usance L/C as the settlement instrument in the contract;
You should submit the application to the Bank after the issuing bank accepted usance draft or issued acceptance notice
After the usance draft accepted by issuing bank, you might as well choose export bill discounting while encountering the temporary difficulty of capital turnover and having demand for short-term capital financing. After the usance draft accepted by issuing bank, you might as well choose export bill discounting while discovering new investment opportunities and the expected yield is higher than the discount rate
Generally Banks won’t provide bill discounting for investment purpose which has no real trade background.

Process:

Exporters sign the financing agreement with the Bank, and submit the export documents to the Bank itself.
After approving the documents, Bank informs them to the foreign bank (the issuing bank or a designated bank) for reimbursement.
Upon receipt of the documents, the foreign bank will give the instruction of acceptance.
Upon receipt of acceptance order, the customers should submit business application to Bank, and the bank effects the payment to the exporter.
Foreign bank effects payment at maturity, which the bank will use it to cover the discount payment.