Forfaiting Glossary

Glossary Items beginning with : D

D/A

Documents against acceptance. Applies to a Collection where the commercial documents are released to the buyer against acceptance of a Bill of Exchange accompanying them.

D/P

Documents against payment. Applies to a Collection where the documents will be released to the buyer against payment.

Data Certa

A requirement of Italian law which can be relevant to forfaited instruments of payment. Simply means “date certain”, i.e. a fixed and ascertained date. The ITFA market practise requires primary forfaiters to ensure that any relevant payment obligations do have a legal date certain. Refer to Market Practice Committee Bulletin No. 1.

Days of Grace

The quote of a Forfaiter will often state a number of days of grace which reflect the number of days’ delay normally experienced in the transmission of payments applicable to the country risk/Commercial Risk involved.

Default

Failure or refusal of an obligor/guarantor to repay a receivable at maturity. Most facility agreements will also determine the events of default which will accelerate the repayment of such loan.

Deferred Payment Letters of Credit

A Letter of Credit calling for payment at a determinable future date without requiring a draft to accompany the documents.

Discount Rate

The rate at which the face value of a trade receivable is discounted. The discount rate is generally calculated as either a Discount to Yield or Straight Discount.

Discount to Yield

Expresses the discount rate as a true interest cost, on a per annum basis, in most cases, maturities exceeding 180 days will be subject to semi-annual compounding. The Discount to Yield calculation is the yield a present value will achieve as it reaches its future value (face value) at maturity. Both Simple Discount to Yield as well as Semi-Annually Compounded Discount to Yield take into account the time value of money. The first is an uncompounded per annum discount rate divided by the face value of the receivable, whereas the latter is a compounded per annum discount rate divided by the face value of the receivable.

Discounting

The purchase of any payment instrument of payment at a discount to allow for the cost of interest on the funds until the receivables mature.

Discrepancy

Where documents presented to a bank under a letter of credit do not conform with the terms of the same letter of credit.