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What Is Forfaiting
What Is Forfaiting
WHAT IS FORFAITING ?
Forfaiting is a form of international
supply chain financing. It involves
the discount of future payment
obligations on a without recourse
basis.
Forfaiting is a flexible discounting
( cash payment ) ( 7 )
(6)
FO R FA IT E R IM PO R T E R ’ S B A N K
Payment on Maturity of negotiable instrument
BENEFITS OF FORFAITING
q Eliminates Risk
§ Removes political, transfer and commercial risk
§ Provides financing for 100% of contract value
§ Protects against risks of interest rate increase and
exchange rate fluctuation
q Enhances Competitive Advantage
§ Enables sellers of goods to offer credit to their customers,
making their products more attractive
§ Helps sellers to do business in countries where the risk of
non-payment would otherwise be too high
q Improves Cash Flow
§ Forfaiting enables sellers to receive cash payment while
offering credit terms to their customers
§ Removes accounts receivable, bank loans or contingent
liabilities from the balance sheet.
q Increases Speed and Simplicity of Transactions
§ Fast, tailor-made financing solutions
§ Financing commitments can be issued quickly
DIFFERENCE BETWEEN FACTORING
AND FORFAITING
1.Suitable for ongoing 1.
Oriented towards
open account sales, single transactions
not backed by LC or backed by LC or bank
accepted bills or guarantee.
exchange.