Mezra Forfaiting
Your international trade finance solution.
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| Trade bills of exchange and promissory notes have been discounted for hundreds of years, and the basis of the calculation for the discount (face value x interest rate x number of days / number of days in year) is easily understood. |
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However,
the advent of computers has made a more sophisticated approach possible,
and banks investing in forfaiting assets are looking to compare their yields
with those, which might be obtained from a Euroloan made directly to the
guaranteeing bank. With such a loan, interest would be paid six monthly
in arrears, and to allow a comparison forfait assets are usually discounted
on a basis which allows for this semi-annual compounding effect. The forfaiting
convention is the DTYCSA discount rate (discount to yield compounded
semi-annually).
Additionally, it is usual for the exporter to pass on some of the financing costs to the importer. This is often by way of a mark up over Libor, and our spreadsheet will also help you calculate your grossed up selling price. Download our free forfaiting spreadsheet now to assist with invoicing for your export business. The only condition is you do not remove the copyright notice. The numbers and text in red are illustrative only, and can be replaced with your own details. The 2005 version is based on the International Forfaiting Association yield formula as set out in their 2004 guidelines, and reconciles to the example given, where a $1,000,000 claim maturing in 850 days and discounted at 10% DTYCSA gives net proceeds of $794,060.94.
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Mezra Finance Ltd 1997 - 2008
Mezra® is a Registered Trademark of Mezra Finance Ltd |
