Every trade finance price is a rate for a number of days plus fees, and the currency sets the day count
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Ossiano Guides · Cost and working capital
The cost of trade finance is a benchmark rate plus a margin, charged for the days the money is out, on a year length that depends on the currency, with fees on top.
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01 · The formula
Every trade finance charge is an annual rate applied for a number of days
Trade finance is priced like rent on money. The rate is quoted for a full year, but you pay only for the days you use the funds. That period is the : the time from the start of a deal to the day it is repaid.
The sum is simple. The charge equals the amount, times the annual rate, times the number of days, divided by the number of days in a year. Fees come on top.
The one surprise is the length of the year. Not every market uses 365 days. Each currency follows a , a rule for counting the days and for how long a year is. The Federal Reserve's H.15 release uses a 360-day year for US money market rates. The Alternative Reference Rates Committee (ARRC), a US market committee, calls the standard in US money markets. It means the actual days that pass, divided by 360.
Here is an example with made-up inputs. USD 1,000,000 at 6.00% for 90 days, counted on ACT/360, costs USD 15,000.00 before fees. Try your own numbers below. The calculator also shows the : the full cost, fees included, measured against the money you actually receive, on a yearly scale.
Figure 1 · Try it
What a trade finance line costs
Set the amount, rate, tenor and currency. Pick interest or discount basis and a fee type to see the total cost and the effective annual rate.
Tenor, days
Currency of the line (sets the day count)
Day count: -
Basis
Fee type
Interest charge
-
Fees
-
Total cost
-
Formula in words: the charge equals the amount times the annual rate times the days, divided by the day count base. On a discount basis the charge is taken off the funds paid out. Percent-per-period fees apply to each 90-day period started. The effective annual rate equals the total cost divided by the funds received, times the base divided by the days.
Our Research Desk used simple interest: amount x annual rate x days / 360 or 365, by currency convention, plus fees. The rates and fees shown are for illustration and are not Ossiano pricing.
This calculator explains the concept only. Actual pricing depends on the obligor, the goods, the tenor, the currency and market conditions on the day.
02 · Base plus margin
The rate is a public benchmark for the period plus a margin for the risk
Every trade finance rate has two parts. The first is a , a public benchmark for the period. The second is a , the extra amount the finance provider charges for the risk it takes.
The US International Trade Administration's Trade Finance Guide prices this way. In forfaiting, a finance provider buys an exporter's right to a future payment. The guide says the cost is a discount rate made of a base rate for the tenor plus a margin for the risk being sold.
Commodity deals use the same two parts. GeoPark's 2025 annual report to the SEC (Form 20-F) says the interest cost of its prepayment from Vitol is based on SOFR plus a margin.
is the main US dollar benchmark. It tracks the cost of overnight cash secured on US Treasury securities. It stood at 3.90% for September 28, 2026, according to the Federal Reserve Bank of New York. The New York Fed publishes the rate every business day at about 8:00 a.m. ET.
Longer deals often use , a forward-looking version of the rate for a set period. Term SOFR was referenced by USD 11.0 trillion of loans as of March 31, 2026, according to CME Group, which publishes it.
Figure 2 · Interactive
SOFR, the base under US dollar trade finance
Tap a point to see that day's rate. The dashed line marks the latest reading.
Source: Federal Reserve Bank of New York, Secured Overnight Financing Rate, effective dates September 21 to 28, 2026. Percentiles are not shown for September 21.
03 · Day count
The currency sets the day count, and the day count changes the cost
Two lines with the same rate can cost different amounts. The reason is the length of the year.
US dollars, euros and Swiss francs count a 360-day year. The ARRC's conventions for recommend Actual/360 for dollar business loans. "In arrears" means the rate for each period is worked out from daily SOFR as the period runs. The European Central Bank uses 360 days in the year for its compounded averages, in line with European money markets. SIX, which runs SARON, the Swiss franc overnight rate, states its day count is ACT/360.
Sterling, yen and Canadian dollars count 365. The ARRC recognizes Actual/365 as the norm for sterling. The Working Group on Sterling Risk-Free Reference Rates sets interest for contracts. SONIA is the sterling overnight benchmark. Japan Exchange Group compounds TONA, the yen overnight rate, on an Act/365 basis in its futures. The Bank of Canada accrues CORRA, the Canadian dollar overnight rate, on an actual/365 (fixed) basis.
The gap is real money. Take USD 1,000,000 at 6.00% for 181 days, with made-up inputs. On ACT/360 the interest is USD 30,166.67. On ACT/365 it is USD 29,753.42. Counting on 360 costs USD 413.24 more.
Figure 3 · Interactive
Day count conventions by currency
Tap a currency to see its benchmark, convention and the issuing source.
Sources: Alternative Reference Rates Committee, July 2020; European Central Bank, 2021; Working Group on Sterling Risk-Free Reference Rates, August 2019; SIX, March 2021; Japan Exchange Group; Bank of Canada, November 2021.
04 · Interest vs discount
Discount pricing takes the charge up front, which lifts the true cost
There are two ways to collect the charge. On an interest basis, you receive the full amount and pay the charge at the end. On a discount basis, the charge comes off the money you receive at the start. This is a . The Federal Reserve's H.15 quotes US Treasury bill rates on a discount basis.
Finance against unpaid invoices often works this way. The Global Supply Chain Finance Forum defines as the sale of receivables to a finance provider at a . Receivables are invoices a buyer has not yet paid. FCI, the global factoring association, says the exporter in international factoring is paid up front by way of a discount.
A discount costs a little more at the same rate. You pay the same charge, but you have less money to use. At 6.00% for 90 days, the effective annual rate is 6.0000% on an interest basis and 6.0914% on a discount basis.
Public buyers use the same sums. The US Treasury's Prompt Payment discount calculator, updated February 26, 2026, gives federal agencies a rule for an . If the discount's effective annual rate is larger than the current value of funds rate, the agency takes the discount and pays early. The page states that rate as 4.00%. Under 5 CFR 1315.7, agencies may take vendor discounts if economically justified.
05 · Fees
Fees come flat, up front or per period, and they weigh most on short deals
Fees are the third part of the price. In , a seller sells its invoices to a finance provider. FCI explains that the seller receives the invoice value less a fee for the service and a charge for the time the money is used. The Global Supply Chain Finance Forum adds that on the due date the finance provider pays the seller the rest of the value, less fees and discount.
Some products charge a fee for each period. A is a bank's backup promise to pay if its customer fails to meet an obligation. The FDIC explains that the bank backs those payments in exchange for an ongoing fee, paid each period for the life of the letter.
A fixed fee matters more on a short deal. It is spread over fewer days, so it adds more to the yearly rate. On USD 1,000,000 at 6.00% for 90 days, a USD 500 flat fee lifts the effective annual rate to 6.2000%. A 0.25% up-front fee lifts it to 7.0000%. A fee of 0.125% for each 90-day period, on a 180-day line, costs USD 2,500.00 and gives 6.5000%.
Figure 4
How basis and fees move the effective rate on USD 1 million for 90 days
Each bar shows the effective annual rate for one pricing case at the same 6.00% nominal rate.
Source: Ossiano Research Desk calculation, illustrative inputs. Day count conventions per the Alternative Reference Rates Committee and the Federal Reserve H.15 release.
06 · Market read
Banks report thinner margins on letters of credit
Margins on letters of credit are moving. Around 40% of banks in the ICC Trade Finance Pulse Check of September 2026 report falling margins. A letter of credit is a bank's promise to pay the seller once the right documents arrive. The survey drew on more than 100 trade finance practitioners.
The ITA's Trade Finance Guide compares costs in words only and gives no fee figures. So every fee in this guide is an example, not a market quote. Our guide to letters of credit explains how they work, step by step.
07 · Ossiano view
The price is clear once the day count is on the table
OBSERVATION 01
The day count is a cost line
On the same 181-day loan, ACT/360 interest runs USD 413.24 above ACT/365 in our Research Desk's worked example. Naming the convention next to the rate lets a treasurer compare quotes across currencies on equal terms.
OBSERVATION 02
The base is public every morning
The New York Fed publishes SOFR each business day at about 8:00 a.m. ET, and Term SOFR sits under USD 11.0 trillion of loans. Any finance user can check the base part of a quote against the published figure.
OBSERVATION 03
Margins on documentary trade are moving
Around 40% of banks in ICC's September 2026 Pulse Check report falling letter of credit margins. Our Research Desk reads this as strong competition to supply letter of credit business.
Summary
Rate, days, year length and fees make the whole price
A trade finance rate is a base rate for the tenor plus a margin for the risk. The charge builds up for each day the money is out, over a year whose length depends on the currency. US dollar money markets use Actual/360 and euro money markets use 360 days. Sterling uses Actual/365.
Discount pricing takes the charge up front, which lifts the effective rate. Fees add a service charge, an up-front fee or a fee for each period. They weigh most on short deals.
Related guides: the cash conversion cycle, tenor explained, letters of credit, forfaiting, factoring vs invoice discounting and dynamic discounting. Instrument cards: letter of credit (usance, acceptance, deferred payment), confirmed letter of credit, forfaiting, factoring, invoice discounting, trade loan and standby letter of credit. Every marked term is defined in our Trade Finance Glossary. From our Research Desk: the market read on mortgage rates and what drives rate levels.
For questions on how these shifts affect existing or planned trade finance exposures, contact the Ossiano Research Desk.
Sources
- Alternative Reference Rates Committee, SOFR "In Arrears" Conventions for Syndicated Business Loans, July 22, 2020. Supports: Actual/360 as the standard US money market convention and the recommendation for SOFR; Actual/365 as the norm for sterling (Daycount section, page 3).
- Board of Governors of the Federal Reserve System, Selected Interest Rates (Daily), H.15, September 29, 2026. Supports: money market series annualized using a 360-day year (footnote 3); Treasury bill rates quoted on a discount basis (footnote 4).
- US International Trade Administration, Trade Finance Guide: A Quick Reference for US Exporters, July 2022. Supports: cost of forfaiting as a base rate for the tenor plus a margin for the risk sold (page 25); comparative cost guidance without fee figures.
- US SEC EDGAR, GeoPark Ltd, Form 20-F for fiscal year 2025, Note 29 Offtake and prepayment agreements, March 31, 2026. Supports: Vitol prepayment interest cost based on SOFR plus a margin.
- Federal Reserve Bank of New York, Markets Data API, SOFR, September 2026. Supports: SOFR readings for effective dates September 21 to 28, 2026, including 3.90% on September 28, and the percentiles in Figure 2.
- Federal Reserve Bank of New York, Secured Overnight Financing Rate, undated. Supports: SOFR published each business day at approximately 8:00 a.m. ET.
- CME Group, CME Term SOFR Rates, March 31, 2026. Supports: Term SOFR referenced by USD 11.0 trillion of loans as of March 31, 2026.
- European Central Bank, Compounded euro short-term rate average rates and index: calculation and publication rules, 2021. Supports: 360 days in the year for European money market calculations (section 2.1).
- Working Group on Sterling Risk-Free Reference Rates (Bank of England), Statement and summary of responses on conventions for referencing SONIA in new contracts, August 2019. Supports: ACT/365 (fixed) interest accrual for SONIA contracts (page 2).
- SIX Group, SARON (Swiss Average Rate Overnight) factsheet, March 2021. Supports: ACT/360 day count for SARON.
- Japan Exchange Group (Osaka Exchange), Contract Specifications, 3-Month TONA Futures, undated. Supports: TONA compounded on an Act/365 basis.
- Bank of Canada, Overview of methodology for CORRA compounded-in-arrears, November 2021. Supports: CORRA compounded in arrears on an actual/365 (fixed) basis.
- Global Supply Chain Finance Forum, Standard Definitions for Techniques of Supply Chain Finance, 2016. Supports: receivables discounting as the sale of receivables to a finance provider at a discount.
- FCI, International Factoring, undated. Supports: the exporter receives payment up front by way of a discount against the invoice.
- FCI, What is factoring?, undated. Supports: invoice value less a service fee and a charge for the period the money is used.
- Global Supply Chain Finance Forum, Factoring, October 31, 2024. Supports: at the due date the finance provider pays the seller the remaining value less fees and discount.
- Federal Deposit Insurance Corporation, RMS Manual of Examination Policies, Section 3.8 Off-Balance Sheet Activities, June 2019. Supports: standby letter of credit payments backed in exchange for an ongoing, periodic fee (page 3.8-2).
- US Treasury, Bureau of the Fiscal Service, Prompt Payment: Discount Calculator, February 26, 2026. Supports: the Treasury's rule for federal agencies on accepting discounts; current value of funds rate stated as 4.00%.
- eCFR (Office of the Federal Register), 5 CFR 1315.7 Discounts, current as of August 6, 2026. Supports: agencies may take vendor discounts if economically justified.
- International Chamber of Commerce, ICC Trade Finance Pulse Check, September 2026, September 2026. Supports: around 40% of surveyed banks reporting declining LC margins; more than 100 trade finance practitioners surveyed.
- Ossiano Research Desk, worked examples (6.1 cost calculator, cases A to F; day count comparison), October 1, 2026. Supports: every calculated figure on this page, from illustrative inputs.
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