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Banking Term: Forfeiting

Jun 1, 2015 15:02 IST

    It is the method of export trade financing, especially when dealing in capital goods (which have long payment periods) or with high risk countries.

    In forfeiting, a bank advances cash to an exporter against invoices or promissory notes guaranteed by the importer's bank.

    In International Trade, when an exporter finds it difficult to realize money from the importer, he sells the right to receive money at a discount to a forfaiter, who undertakes inherent political and commercial risks to finance the exporter, of course with assumption of a profit in the venture.

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