Forfaiting
Category: Finance
Definition (plain English)
Forfaiting is selling medium- or longer-term trade receivables, often backed by negotiable instruments or bank risk, to receive cash without waiting for maturity.
Why it matters commercially
It can remove payment waiting time from larger export deals, but pricing, bank risk, documentation quality, and recourse terms affect the economics.
Example
An exporter discounted accepted payment obligations from a capital-goods shipment so cash could be recovered before the usance period ended.
Common mistake
Comparing forfaiting proceeds to invoice value without modeling discount cost, bank charges, document compliance, and whether risk is truly without recourse.
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