Discounting receivables from documentary letters of credit

Discount of the letter of credit is a form of the Exporter's financing. BGK makes payment in favour of the Exporter (the beneficiary of the l/c) being the amount due under the letter of credit prior to the date of payment established in the l/c, reduced by discount interest.

Discount is secured by an insurance guarantee issued by Korporacja Ubezpieczeń Kredytów Eksportowych S.A. (KUKE)

Only letters of credit available by deferred payment, both confirmed and unconfirmed, can be discounted. 

Advantages of  l/c discount: 

• enhances attractiveness of commercial offer presented by Exporters,
• enables transactions in the markets of higher risk,
• enables adding confirmation to the letters of credit from the countries of non-marketable risk,
• access to the l/c proceeds prior to the date of payment established in the l/c,
• provides deferred payment terms for Importers,
• Exporters become independent of contracting parties risk,
• there is no recourse to l/c beneficiaries.

Basic terms:

• deferred payment period - up to  2 years,
• discount of up to 100 % of l/c amount,
• the seat of the issuing bank is in a non-marketable risk country, 
• the l/c is subject to „Uniform Customs and Practice for Documentary Credit", ICC Publication,
• only  l/c's related to Exporters of Polish product  can be discounted 
• l/c discount is available only for BGK customers

Costs:

• interest based on EURIBOR/LIBOR/WIBOR rates increased by a BGK margin  - to be borne by the beneficiary of the l/c (Exporter),
• discount commission- 0,2% document's amount (instead of payment commission in the l/c)
• BGK's fees and commissions related to the l/c are usually covered by the l/c beneficiary as per BGK  Tariff and Commissions Table.

Scheme of the transaction:

1. Conclusion of a contract between a Polish Exporter and a foreign Importer

2. Issuance of the letter of credit available by the deferred payment by the importer's bank

3. Shipment of goods or delivery of services by the Exporter

4. Presentation of the documents requested under the l/c by the Exporter at BGK counters in connection with the shipment/delivery together with an order to discount l/c proceeds

5. Issuance of an insurance guarantee by KUKE (by order of BGK)

6. BGK's payment to the Exporter after deduction of the discount interest

7. Issuing bank's payment according to the l/c terms

How to obtain financing ?

Contact:
Foreign Trade Support Department
Al. Jerozolimskie 7, 00-955 Warszawa
Tel. + 48 22 522 92 75 lub +48 22 522 96 65
Fax + 48 22 522 91 28
E-mail: dwhz@bgk.com.pl