We support you in financing your foreign transactions
In order to remain internationally competitive, a good product is often not enough – exporters must be able to offer attractive payment conditions or a financing package. If the buyer wishes long-term financing for the phase after delivery or commissioning, supplier credits will tie up the exporter’s liquidity for a long time. As an alternative to arranging a buyer credit and payment of the exporter by a bank, the exporter can sell (forfaiting) and cede the supplier credit receivables in order gain liquidity.
The Federal Government facilitates the forfaiting of export receivables
A Forfaiting Guarantee makes it easier for a German exporter to finance his receivables resulting from a single export transaction by means of obtaining improved conditions of cover (enhancement of an insurance product to a guarantee-like product) in favour of the assignee (credit institution or forfaiting company) for the amount of the insured percentage (80%). (The product is available for a limited period of time until 30 June 2026.)
Worth knowing: The Forfaiting Guarantee supplements a Supplier Credit Guarantee.
Forfaiting Guarantee at a glance
- As applicants: German manufacturing companies with export experience
- As beneficiary:
- German credit institutions
- German branches of foreign credit institutions
- foreign banks domiciled in a country which is a member of the European Economic Area (= EU, Iceland, Liechtenstein, Norway) or in Switzerland
- certain German forfaiting / factoring companies
- short-term (up to 2 years)
- medium/long-term (2 years and longer)
Receivables from the cross-border delivery of goods or provision of services having a contract value of up to EUR 10 million (or the euro equivalent)
Exporters can apply for a Forfaiting Guarantee in addition to a Supplier Credit Guarantee for an export transaction. In forfaiting operations, the exporters cede supplier credit receivables covered by Federal Export Credit Guarantees to forfaiters (credit institutions or forfaiting companies, hereinafter: credit institutions). The supplier credit cover protects them against the credit risk, i.e. the risk of default for commercial or political reasons, in respect of the covered receivables. Nevertheless, the credit institution is still faced with the risks of legal validity and beaches of obligations by the exporter (legal enforceability risks).
With the Forfaiting Guarantee, the Federal Government grants the beneficiary, i.e. the credit institution, a guarantee-like claim for compensation in respect of for 80% of the respective receivable. This guarantee-like claim exceeds the exporter’s claim for indemnification in substance. The credit institution obtains a direct claim for payment even if the legal enforceability risks have materialised. This claim is only subject to specific obligations to be performed by the credit institution (in particular a plausibility check regarding the performance of the export transaction) and can already be asserted by the credit institution one month after the payment default. Any breaches of obligations on the part of the exporter do not preclude indemnification. In this context the credit institution submits the export contract, evidence that the down-payment was made and a commercial invoice to the Federal Government in the event of a loss.
Once the regular waiting period under the Supplier Credit Guarantee (normally 6 months) has expired and the regular loss assessment procedure has been completed, the credit institution will be indemnified for the remaining 15 percentage points because the Supplier Credit Guarantee covers 95% of the amount receivable.
The payment of this remaining part of the indemnification is contingent on the uncollectability of a legally valid and due amount receivable because of a risk covered under the Supplier Credit Guarantee. If all necessary documents are available to the Federal Government, the loss will be calculated within 2 months. The indemnification amount will then be paid within one further month.
Principle: exports to all countries
- Exception: Exports with credit periods of up to two years to EU and core OECD member states (i.e. EU countries, Canada, Iceland, Japan, New Zealand, Norway, Switzerland, United States and United Kingdom); a condition for the issue of a Forfaiting Guarantee is that the exporter must have experience with exports to the buyer country (under certain circumstances in the same region / same jurisdiction is sufficient)
- One-off premium amounting to a certain percentage of the covered order value (excluding interest), no administrative fees, payable by the exporter
- 20% of the ceded amount receivable with regard to the risks of the legal validity and breaches of obligations (can be passed on to the exporter);
In any case, the uninsured percentage under the ceded Supplier Credit Guarantee amounts to 5% for political risks and 5% for commercial risks (may not be passed on to the exporter)
Model clause – The Federal Governments right of recourse against the exporter under the Forfaiting Guarantee (FFG)
- It is a structural element of the Forfaiting Guarantee that the Federal Government will indemnify the forfaiter even if there does not exist a claim to indemnification under the Supplier Credit Guarantee, e.g. because one of the risks impeding the legal enforceability has materialised.
- However, this risk shall not remain with the Federal Government in the end. On the contrary, it is an essential feature of the Forfaiting Guarantee that the Federal Government can have recourse to the exporter after indemnifying the forfaiter.
- This recourse provision will be incorporated in the exporter’s guarantee document as Special Condition and reads as follows:
“If the Federal Government has indemnified the beneficiary [the forfaiter], it shall be entitled to have recourse to the policyholder [the exporter] solely because of that and the policyholder acknowledges and accepts this. The recourse claim has to be satisfied waiving all objections and defences that may exist. The policyholder remains free to assert any counterclaims that may exist after satisfying the recourse claim.
The Federal Government will not assert its recourse claim against the policyholder in particular if the policyholder has submitted all documents for a loss assessment under the Supplier Credit Guarantee without delay and the assessment by the Federal Government had the result that the Federal Government was liable to indemnify it under the Supplier Credit Guarantee.”
Forfaiting Guarantee: Your advantages at a glance
- Sale of receivables to relieve the pressure on the balance sheet
- Freeing up of liquidity
- Making the granting of repayment periods to foreign buyers possible
- The Forfaiting Guarantee enhances supplier credit cover. The legal validity of the supplier credit claim and of any collateral is not a prerequisite for indemnification under the Forfaiting Guarantee.
- Any failure of the part of the exporter to comply with its obligations (in accordance with Art. 15 of the General Terms and Conditions (G)) does not release the Federal Government from its liability.
- The waiting period in the case of protracted default is reduced from 6 months to one month.
- The claim settlement period is reduced from 2 months to one month.
You as exporter can submit the application for a Forfaiting Guarantee trouble free in our customer portal myAGA.
Applying for a Forfaiting Guarantee
You as exporter can apply for a Forfaiting Guarantee quite easily online via the myAGA customer portal. For this purpose, please register once and comfortably with just a few steps with our myAGA customer portal. If you already use myAGA, you can log on directly with your access data.
This is possible even if the credit institution that will buy the receivables is not yet known.
If you need assistance with the application or if you have any questions regarding the suitable product for you, please do not hesitate to contact our business consultants.
FAQs – Forfaiting Guarantee (FFG)
What conditions must be met for an Forfaiting Guarantee to be issued?
The prerequisites for the issue of an FFG are that the Federal Government has provided supplier credit cover for the export transaction and that the exporter assigns the corresponding export receivable as well as its claims under this cover to a forfaiter. The FFG can only be granted in combination with a Supplier Credit Guarantee. The terms and conditions of supplier credit cover, which is structured as an insurance product, are enhanced by the FFG in favour of the forfaiter and converted into a guarantee-like claim that can be asserted directly against the Federal Government.
What is covered?
The FFG protects the forfaiter as the beneficiary (and not the exporter) against the risk of not receiving any indemnification under the assigned supplier credit cover for reasons beyond its control. This is the case, for example, if entitlement to indemnification is denied because the exporter’s claim for payment against the foreign debtor is not legally valid (enforceability risk).
In what way does an Forfaiting Guarantee enhance supplier credit cover?
The FFG improves the protection offered under supplier credit cover. With the declaration issued by the Federal Government consenting to the assignment of the export receivable and the claims under the guarantee in favour of the forfaiter, individual provisions of the Supplier Credit Guarantee are deemed to be non-applicable or are amended.
This particularly includes the following aspects:
- The legal validity of the supplier credit claim and of any collateral is not a prerequisite for indemnification (Art. 5 (1) Sentence 1, (2) and (3) of the General Terms and Conditions (G)).
- Any failure on the part of the exporter to comply with its duties in accordance with Art. 15 of the General Terms and Conditions (G) does not release the Federal Government from its liability.
- The waiting period in the case of protracted default is reduced from 6 months to one month.
- The claim settlement period is reduced from 2 months to one month.
The details are governed by the Special Conditions for the Consent of the Federal Government to the Assignment of Covered Supplier Credit Receivables with Enhanced Cover in Favour of the Assignee (Special Conditions (FFG)).
For what transactions is an Forfaiting Guarantee available?
An FFG can be granted for the delivery of goods / the provision of services with an order value of up to EUR 10 million (or the euro equivalent) for which supplier credit cover with an uninsured percentage reduced to 5% for commercial risks (95% cover) has been provided. Trading and / or service-only transactions are excluded.
The granting of cover is contingent upon a positive performance check for the exporter determined on the basis of the self-disclosure form completed for the FFG.
The FFG is available for export transactions if the exporter already has a successful business relationship with this customer. An FFG can only be granted for business with new foreign customers if the exporter has experience with the Federal Government’s Export Credit Guarantees and can also demonstrate that it has sufficient experience of the intended foreign market (e.g. including through uncovered business).
What is the cover ratio for the forfaiter under the Forfaiting Guarantee?
Credit risks under the Supplier Credit Guarantee in favour of the forfaiter remain subject to a cover ratio of 95%. The guarantee-like claim under the FFG is capped at 80%.
Who can apply for an Forfaiting Guarantee?
The application for an FFG must be submitted by the exporter. The FFG can be issued either together with the Supplier Credit Guarantee or at a later date. An application is still possible even when the covered supplier credit has already entered the repayment phase.
If the export contract has not yet been entered into, the applicant initially receives a legally binding offer of cover. The exporter can use this offer of an FFG in the negotiation process for the sale of the receivable. The forfaiter is not involved in the FFG cover process. After the export contract has been signed, cover is granted by the Federal Government for the supplier credit together with the FFG. The FFG takes effect when the Federal Government has received the exporter’s notice of assignment together with the forfaiter’s consent to the Special Conditions (FFG).
Who can be a beneficiary under an Forfaiting Guarantee?
The following parties can be beneficiaries:
- Credit institutions domiciled in a country which is a member of the European Economic Area (EEA) or in Switzerland; or
- Domestic financial services companies which have a licence issued by the German Federal Financial Supervisory Authority (BaFin) allowing them to buy receivables on a recurring basis under master contracts in accordance with Art. 1 (1) No. 2 of the Supplementary provisions relating to the assignment of Guaranteed Amounts – GC (FAB).
What conditions must be met for the sale of receivables?
The Federal Government’s consent to the sale of the covered export receivables subject to cover enhancement is particularly contingent on the following conditions:
- The forfaiter must purchase 100% of the covered export receivable.
- The uninsured percentage totalling 5% for political and commercial risks (under the Supplier Credit Guarantee) may not be passed on to the exporter. However, it is still possible to cover the uninsured percentage of 20% for the additional risks covered with the FFG by alternative means.
- The forfaiting proceeds may only be paid out after all (partial) deliveries and services have been completed or upon confirmation of operational readiness if this is required of the exporter under the export contract.
What are the parties’ obligations in this triangular constellation?
The exporter is the policyholder under the Supplier Credit Guarantee with all rights and obligations. It must ensure that it is able to fulfil its obligations independently of the forfaiting transaction. The forfaiter is not a policyholder. The FFG has a guarantee-like structure for the benefit of the forfaiter. Accordingly, the forfaiter’s own obligations are confined to those actions that it can control itself. These particularly entail the obligation for the forfaiter to satisfy itself with the diligence dictated by sound banking practice that the exporter has submitted evidence confirming that the deliveries/services have been made to the foreign customer before disbursing the forfaiting proceeds.
When and how is indemnification paid?
If any payment default arises under a transaction covered by the FFG, the forfaiter will on request receive indemnity of 80% of the covered receivable one month after the due date and a further claim examination period of one month. In this respect, it is irrelevant whether a credit or a legal enforceability risk has arisen with respect to the outstanding receivable. This is an upfront abridged indemnification procedure. For this purpose, the forfaiter must submit a form confirming the disbursement requirements, among other things.
The subsequent usual loss assessment process determines whether or not an indemnification claim exists under the Supplier Credit Guarantee. If so, the forfaiter receives indemnification for the further 15 percentage points of the covered receivable under the export transaction after the expiry of the standard six-month waiting period. Otherwise, the forfaiter continues to receive indemnification for continuing maturities under the FFG, although no indemnity is paid under the Supplier Credit Guarantee. Since such a loss, which is not indemnifiable under the supplier credit cover, falls within the exporter’s sphere of risk, the Federal Government has a corresponding right of recourse against the exporter.
How is the right of recourse against the exporter structured?
As a rule, the German Federal Government will only exercise its right of recourse when and as soon as it has rejected indemnification under the Supplier Credit Guarantee. However, the exporter must cooperate in the indemnification procedure and provide the necessary documentation. If it fails to duly comply with this duty, the right of recourse may be asserted on a correspondingly earlier date.
What does the Forfaiting Guarantee cost?
The exporter is charged a variable additional premium for the issue of an FFG on top of the premium for the underlying Supplier Credit Guarantee. No insurance tax is payable.
An interactive tool is available on the Internet for calculating the premium. Further information can be found in the brochure “Fees and premium rates” (coming soon).
How do I obtain cover?
Contact with the Federal Government is established via Euler Hermes Aktiengesellschaft.
The employees of Euler Hermes AG in Hamburg as well as at the numerous regional offices will be pleased to answer any additional questions you may have. Information material and the Special Conditions (FFG) can also be viewed and downloaded at www.exportkreditgarantien.de.