Forfaiting
Selling medium/long-term receivables at a discount, often without recourse.
Detailed Description
Forfaiting
What is forfaiting?
Forfaiting is a financing technique where a seller sells their medium to long-term receivables to a financial institution at a discount for immediate cash flow.
What are the key features of forfaiting?
Key features include non-recourse financing, long-term financing, discounted purchase, and documentary requirements.
What are the benefits of forfaiting for exporters?
Benefits include immediate cash flow, risk mitigation, simplified financing, and enhanced competitiveness.
How does forfaiting differ from factoring?
Forfaiting deals with longer-term receivables and is a one-time transaction, while factoring typically involves short-term receivables and ongoing relationships.
What risks are associated with forfaiting?
Risks include credit risk, cost of discount, market risk, and regulatory challenges.