International Trade Finance & Export Banking
Export Forfaiting Straight Discount to Yield Formula
Convert ICC URF 800 Forfaiting Straight Discount Quotes (ACT/360 plus Settlement Grace Days) into Upfront Discount Deduction, Net Exporter Proceeds, Discount-to-Yield Rate, and All-In Effective APR.
Convert upfront banker’s straight discount plus grace days into true yield-to-maturity!
In cross-border capital-goods export forfaiting (ICC Uniform Rules for Forfaiting URF 800), a forfaiter purchases avalized (bank-guaranteed) bills of exchange or deferred Letters of Credit WITHOUT RECOURSE at a quoted Straight Discount Rate d_str (ACT/360). Two mechanics make the exporter’s true borrowing rate materially higher than d_str: (1) forfaiters add 3–7 Settlement Grace Days onto actual Maturity_Days to cover cross-border clearing: Upfront_Discount = Face * d_str * ((Maturity_Days + Grace_Days) / 360); and (2) because discount interest and document/commitment fees are deducted UPFRONT from proceeds, pure Discount-to-Yield already rises to d_str / (1 - d_str * t), while All-In Exporter APR over actual Maturity_Days hits ((Face - Net_Proceeds) / Net_Proceeds) * (360 / Maturity_Days)!
Verify on Avalized_Bill_Face = $1,000,000 (B2), Actual_Maturity_Days = 175 days (B3), Clearing_Grace_Days = 5 days (175 + 5 = 180 charged discount days = 0.50 ACT/360 yr, B4), Quoted_Straight_Discount d_str = 0.08 (8.00% p.a., B5 -> Upfront Discount = $1,000,000 * 0.08 * 0.50 = $40,000.00 in E2), and Aval_Document_Fee = $10,000 (B6 -> Net Exporter Cash Proceeds = $950,000.00 in E3): Pure Discount-to-Yield over 180 charged days is 0.08 / (1 - 0.04) = 0.0833 (8.33% in E4), and All-In Exporter Effective Cost over 175 actual funding days is (50,000 / 950,000) * (360 / 175) = 0.1083 (10.83% in E5)!
| URF 800 Forfaiting Metric ($1M Face, 175d Tenor + 5d Grace, 8.0% Straight, $10k Fee) | Formula | Verified Output |
|---|---|---|
| Upfront Straight Discount ($) | Face * d_str * ((Tenor + Grace) / 360) | $40,000.00 (180 Charged Days) |
| Net Exporter Cash Proceeds ($) | Face - Upfront_Discount - Doc_Fee | $950,000.00 ($960k @ $0 Fee) |
| Pure Discount-to-Yield (ACT/360) | d_str / (1 - d_str * ((Tenor+Grace)/360)) | 0.0833 (8.33% vs 8.00% Straight) |
| All-In Exporter APR (ACT/360) | ((Face - Proceeds)/Proceeds)*(360/Tenor) | 0.1083 (10.83%; 0.0833 @ 0 Grace/Fee) |
All-In Exporter Forfaiting Effective Cost (ACT/360) Formula
Validate Face > 0, Maturity_Days >= 1, Grace_Days >= 0, d_str > 0, and Net_Proceeds > 0!
=LET(fc_v, B2, mt_d, B3, gr_d, B4, d_st, B5, dc_f, B6, IF(OR(fc_v <= 0, mt_d < 1, gr_d < 0, d_st <= 0, dc_f < 0), "Invalid Forfaiting Quote", LET(ds_u, fc_v * d_st * ((mt_d + gr_d) / 360), nt_p, fc_v - ds_u - dc_f, IF(nt_p <= 0, "Invalid Forfaiting Quote", ROUND(((fc_v - nt_p) / nt_p) * (360 / mt_d), 4)))))Textbook Money-Market Identity Check (Grace = 0, Fee = $0)
Set Maturity = 180 days, Grace = 0, and Document_Fee = $0: both E4 and E5 converge to 0.0833 (8.3333% = 0.08 / 0.96)!
=IF(ISTEXT(E3), E3, ROUND(B5 / (1 - B5 * ((B3 + B4) / 360)), 4))Try the example
Use the original values or change them to test your understanding.