Forfaiting

The word `forfait’ is derived from the French word `a forfait’ which means the ‘surrender of rights’. Forfaiting is known as a technique of financing export credit on a w/without-recourse basis, normally represented by negotiable instruments such as Letter of Credts, BGtee or bills of exchange maturing at short to medium terms. Forfaiting is a method of export financing that is uniquely suited to small to medium -size firms that do not export because of their unfamiliarity with-and the risks associated with -international trade. sometimes called non-recourse financing.
In a forfaiting transaction, the exporter surrenders without recourse to him, his rights to claim for payment of goods delivered to an importer, in return for an immediate cash payment from a forfaiter thus  converting a credit sale into cash sale.

• Letter of Credit with deferred payment

Here we can purchase and discount the receivable under a Letter of Credit in the moment, when the shipment took place and the documents required under the Letter of Credit are presented and accepted by the payment domicile – usually the opening bank (the bank of the importer).

• Promissory Notes / Bills of Exchange

These instruments must always be payment instruments and not security instruments. When discounted, usually documentation evidencing the shipment of goods is required (i.e. sales contracts, invoices and transport documents).

• Loan / Credit Agreements

This instrument is used in countries, where use of e.g. Promissory Notes or Bills of Exchange is legally not possible or is administratively very difficult. Having documentation evidencing the shipment of goods is required (i.e. sales contracts, invoices and transport documents).

• Bank Guarantees

In order to discount a bank guarantee, it has to be an irrevocable, unconditional and freely transferable instrument. A Bank Guarantee can be issued in connection with e.g. Account Receivables, Promissory Notes / Bills of Exchange etc.