Forfaiting
Forfaiting is a financial transaction where a seller of goods or services sells their medium- to long-term receivables at a discount to a specialized institution, known as a forfaiter, in exchange for immediate cash. Typically used in international trade, forfaiting helps exporters manage risks and improve cash flow by eliminating the uncertainty of collecting payments in the future. The forfaiter assumes the credit risk of the buyer, allowing the seller to focus on their business without worrying about delayed payments or defaults. This financing method is beneficial for both exporters and financial institutions.
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Forfaiting is a financial practice where a seller in international trade sells their receivables—payments owed by buyers—to a third party, known as a forfaiter. This allows the seller to receive immediate cash without waiting for the buyer to pay. The forfaiter assumes the risk of non-payment and collects the money from the buyer later. Typically used for large transactions, forfaiting facilitates trade by enhancing liquidity for sellers, enabling them to reinvest in their business sooner while providing buyers with credit terms. It is especially common in transactions involving goods and services across national borders.