What is the meaning of forfaiting?
Forfaiting is a method of trade finance that allows exporters to obtain cash by selling their medium and long-term foreign accounts receivable at a discount to a forfaiter, a specialized finance firm or a department in a bank.
What is forfeiting explain its mechanism?
Forfaiting is a mechanism where the exporter surrenders his rights to receive payment against the goods and services rendered to the importer in exchange for a cash payment from the forfaiter. Through forfaiting, the exporter can easily convert a credit sale into a cash sale, without recourse to him or his forfaiter.
What are the different types of forfaiting?
Features of forfaiting
- A forfaiting transaction is always done at a discount and on a non-recourse basis.
- A guarantee from his local bank always backs the importer’s payment obligation.
- There are two types of financing: fixed rate and floating rate.
What are features of forfeiting?
Salient Features of Forfaiting In forfating credit is advanced to the importer of capital goods for a certain period. The amount of payment is receivable in any convertible currency. The letter of credit or bank guarantee is given by the importer’s bank. Finance is provided on a fixed or floating interest rate.
Which is a party of forfeiting?
In this way, the three parties involved in the forfaiting process are the exporter, the importer and the forfaiter.
What are the problems of forfeiting?
The following are some of the disadvantages of forfaiting. 1. Forfaiting is not available for deferred payments especially while exporting capital goods for which payment will be made on a deferred basis by the importer. 2.
What are the features of forfaiting?
Salient Features of Forfaiting
- In forfating credit is advanced to the importer of capital goods for a certain period.
- The amount of payment is receivable in any convertible currency.
- The letter of credit or bank guarantee is given by the importer’s bank.
- Finance is provided on a fixed or floating interest rate.