Forfaiting is a type of transaction that takes place between an exporter and an investor. With this arrangement, an investor comes in and offers cash to the exporter for all of the receivables that it has. The exporter will generally sell its receivables for a discount compared to what it is actually owed. The money that is due in receivables is due from the importers with which the exporter works. 

Benefit for Exporter

This transaction can be very desirable for some exporters. Many exporters are good at what they do, but they do not want to have to wait around for payments from the importers. When an investor comes into the picture, an exporter can get cash immediately for all of the accounts it has. This definitely improves cash flow and allows the exporter to focus on its job.

Benefit for Investor

This arrangement is also very beneficial for the investor. The investor is able to make almost an immediate return on its investment. The terms that are set up with the importers are usually very short, so the investor does not have to wait long to get its money back with a premium. For having immediate cash, the investor is rewarded greatly.

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