Forfaiting services
A method for exporter to receive immediate cash by selling their medium and long-term receivables.
The exporter eliminates risk by making the sale without recourse.
Advantages of forfaiting
  • Eliminating the risk that the exporter will receive payment
  • Also protects against credit risk, transfer risk, and the risks posed by foreign exchange rate or interest rate changes.
  • Simplifies the transaction by transforming a credit-based sale into a cash transaction
  • Forfaiting is flexible
How forfaiting works
1
A forfaiter's purchase of the receivables expedites payment and cash flow for the exporter. The importer's bank typically guarantees the amount.
2
The purchase also eliminates the credit risk involved in a credit sale to an importer. Forfaiting facilitates the transaction for an importer that cannot afford to pay in full for goods upon delivery.
3
The importer's receivables convert into a debt instrument that it can freely trade on a secondary market.
4
The receivables are typically in the form of unconditional bills of exchange or promissory notes that are legally enforceable, thus providing security for the forfaiter or a subsequent purchaser of the debt.
5
These debt instruments have a range of maturities from as short as one month to as long as 10 years. Most maturities fall between one and three years from the time of sale.
Forfaiting service fees depend on:
  • Amount of transferred accounts receivable
    1
  • Quality and quantity of transferred counterparties
    2
  • Payment deferral period
    3