Forfaiting

Filed Under » ,
Dictionary Says

Definition of 'Forfaiting'

The purchasing of an exporter's receivables (the amount importers owe the exporter) at a discount by paying cash. The forfaiter, the purchaser of the receivables, becomes the entity to whom the importer is obliged to pay its debt.
Investopedia Says

Investopedia explains 'Forfaiting'

By purchasing these receivables - which are usually guaranteed by the importer's bank - the forfaiter frees the exporter from credit and from the risk of not receiving payment from the importer who purchased the goods on credit. While giving the exporter a cash payment, forfaiting allows the importer to buy goods for which it cannot immediately pay in full. The receivables, becoming a form of debt instrument that can be sold on the secondary market, are represented by bills of exchange or promissory notes, which are unconditional and easily transferred debt instruments.

Related Definitions

  • Accounts Receivable - AR

    Money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been delivered or used, but not yet paid for. Receivables usually come ...
    Read More »
  • Promissory Note

    A written, dated and signed two-party instrument containing an unconditional promise by the maker to pay a definite sum of money to a payee on demand or at a specified future date.
    Read More »
  • Bill Of Exchange

    A non-interest-bearing written order used primarily in international trade that binds one party to pay a fixed sum of money to another party at a predetermined future date.
    Read More »
    • Debt Security

      Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount borrowed), interest rate and maturity/renewal date. Debt ...
      Read More »

Articles Of Interest

Partner Links