{"id":3691,"date":"2018-12-03T10:10:33","date_gmt":"2018-12-03T15:10:33","guid":{"rendered":"http:\/\/www.letterofcredit.biz\/?p=3691"},"modified":"2019-04-06T06:14:53","modified_gmt":"2019-04-06T10:14:53","slug":"how-forfaiting-works","status":"publish","type":"post","link":"https:\/\/www.letterofcredit.biz\/index.php\/2018\/12\/03\/how-forfaiting-works\/","title":{"rendered":"How Forfaiting Works?"},"content":{"rendered":"

Forfaiting is an international supply chain financing methods.<\/p>\n

Forfaiting means the discount of future payment obligations on a without recourse basis.<\/p>\n

In other words, forfaiting is discounting of trade\u2010related receivables secured with trade finance instruments such as bills of exchange<\/a>, promissionary notes or deferred payment letter of credit<\/a>.<\/p>\n

In the U.S., forfaiting is known as “structured trade finance”, and every year more than USD 300 billion of world trade takes place using forfaiting.<\/p>\n

What are the Main Characteristics of Forfaiting?<\/strong><\/h4>\n

Forfaiting is an international trade finance tool.<\/p>\n

It helps exporters or international manufacturing companies to reach cash flow by selling their debts, which are mostly supported by a bank guarantee<\/a>, or trade\u2010related receivables secured with trade finance instruments such as bills of exchange, promissionary notes or deferred payment letter of credit proceeds with a discounted price to the forfaiting companies.<\/p>\n

Exporters sell their debts under a forfating agreement without recourse basis<\/a>, which means that once the debt is sold the non-payment risk passes to the forfaiter.<\/p>\n

What would be happening to the original payment obligation will not be concerning the sellers after that point.<\/p>\n