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Discounting receivables from documentary letters of credit

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

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

Only letters of credit with deferred payment option, both confirmed and unconfirmed, can be discounted.

Advantages of l/c discount: 

  • enhances attractiveness of commercial offer presented by Exporters,
  • enables transactions in the high risk markets,
  • 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 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,
  • seat of the issuing bank shall be located 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 exports of products of Poland 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% of the document's amount (instead of l/c payment commission)
  • 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 transaction:

How to obtain financing

1. L/c discount is made upon a written order presented by the beneficiary of the l/c along with the shipping documents.

2. L/c discount is possible only when documents strictly complying with l/c terms are presented or when all discrepancies in documents are approved by the issuing bank

3. Once the discount conditions are confirmed by the Exporter, BGK requests him to deliver declarations related to the contract and Polish origin of exported goods or services. These declarations are required by KUKE. After receipt of KUKE insurance guarantee, BGK makes payment to the Exporter. The amount of payment is reduced by discount interest.

The "product of Poland"
The principles of recognition of exported products and services as the "product of Poland" are defined in order of the Minister of Economy of 6th August 2001 (Polish Journal of Laws of 2001, No. 101, Item 1097) which indicates the maximum percentage share of foreign content in exported final product, allowing the product to be categorized as the "product of Poland".

In general, the foreign content may not exceed 50% of the value of exported product or service, exceptions are defined in the Order.

Contact

Trade Finance Sales Team
Transactional Banking Department

tel. +48 22 599 83 08
e-mail: dbt@bgk.pl

Al. Jerozolimskie 7, 00-955 Warszawa