Forfaiting

 

 

Forfaiting

The term forfaiting (à forfait) refers to another financing instrument: the purchase of receivables, particularly from foreign trade transactions whose maturities/due dates lie in the future. The receivables payable in the future are discounted to a net present value. Here, the purchaser of the receivables assumes the credit risk of the debtor, but is not liable for the legality of the receivables. The latter remains with the seller, as is customary with purchase contracts. The advantage for the seller is evident. Provided delivery is made according to the underlying contract, thus ensuring the legal basis of the receivable, forfaiting eases liquidity and internal counterparty credit limits.

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