Forfaiting means the purchase of receivables. Recourse is waived in the event of default by the debtor.
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Definition / explanation
Bei der Forfaitierung (übersetzt im Paket verkaufen) handelt es sich um ein klassisches Instrument in der Export finance. Darunter versteht man den Ankauf von Forderungen. Dabei wird der Käufer der Forderung Forfaiteur, der Verkäufer Forfaitist genannt.
With real forfaiting, recourse against the seller is waived in the event of insolvency or default by the debtor. From a legal point of view, recourse to the seller is only possible in the case of fake forfaiting. In both cases the seller is liable for the verity (legal validity) of the claim.
Procedure and requirements for forfaiting
- Der Importeuer muss für einen eingeräumten Lieferantenkredit eine Sicherheit wie z.B. Bankavals oder deferred payment-Letter of credit nacchweisen.
- The forfaitist (exporter) sells the receivable minus the interest to the forfaiteur (exporter's bank) and transfers the rights from the hedging instrument to the forfaiteur.
- The amount is collected when it is due and the forfaiteer receives the interest contained in it as profit.
Benefits of forfaiting
- low financing costs
- External financing and balance sheet relief for the forfaitist
- quick cash
- Failure risk is given
- The exchange rate risk disappears at the time of the sale of the receivables
- Cover by a credit insurer is not necessary
- The debt collection function is taken over by the buyer
Differences between forfaiting and factoring
- Forfaiting is a short to medium-term claim, while factoring is a short-term claim of up to 90 days.
- Forfaiting is an individual transaction, factoring a framework agreement.
- With forfaiting political and economic risks are bought, with factoring economic risks.
- Forfaiting is an abstract claim (payout minus discount), while factoring is a payout minus a blocked amount of 5 - 20%.
- There is a minimum amount of EUR 50,000 for forfaiting, while factoring is a bulk transaction.
- With forfaiting there are no services, while with factoring dunning and accounts receivable are offered as services.
- The receivables can be traded in forfaiting on the international market in London; there is no secondary market for factoring.
Forfaiting is bills of exchange and book claims, factoring only book claims.