- Instrument
- Without-recourse purchase of receivables
- Raised by
- Exporter, or buyer under a program
- Priced as
- Discount to face value
- Tenor
- Typically medium-term
Selling the receivable, not borrowing against it
Forfaiting is the outright purchase of a future payment obligation — an accepted draft, a promissory note, a deferred-payment credit — at a discount, without recourse to the seller. If the obligor does not pay at maturity, that is the forfaiter’s problem, not yours.
That distinction matters beyond cash flow. Because the asset is sold rather than pledged, a without-recourse purchase is what supports derecognising the receivable — though whether it comes off your balance sheet is an accounting conclusion your auditors reach on the facts, not something the structure grants automatically. For an exporter selling into a difficult market on extended terms, it converts a long, risky receivable into a settled sale.
Pricing is a discount rather than an interest rate: the forfaiter quotes what it will pay today for a fixed amount payable later. That single number bundles benchmark, credit spread, country risk and tenor — so comparing several quotes side by side is the only way to see whether it is fair.
The shape of the flow
A sale, not a loan. The receivable changes owner and the credit risk goes with it — the forfaiter has no recourse to you.
How it works on TradeOrigin
Deal by deal, or as a standing program with a buyer and a forfaiting bank already in place.
Post the paper
Obligor, guarantor or avalising bank, country, maturity profile, currency and amount, with the underlying documents attached.
Banks bid the discount
Forfaiters quote what they will pay for the receivable, sealed from each other, on the same set of facts.
Accept and assign
Accept a bid and the assignment is recorded, with the without-recourse terms fixed on the deal.
Settle and track to maturity
Proceeds, value date and each maturity sit on the record; the forfaiter collects from the obligor at maturity.
Who it is for
Selling on extended terms
You have won business in a market you would rather not carry for three years, and you want the sale settled now.
Running a reverse program
A buyer can stand up a forfaiting program so its suppliers are paid early against the buyer’s own standing.
Buying term trade assets
Fixed-rate, self-liquidating paper with a bank guarantor is attractive — provided you can see enough of it.
What you get
A true sale, not a loan
Without recourse means the receivable and its risk both change hands — which is what supports derecognition, subject to your own accounting view.
Fixed cost, known today
The discount is agreed up front, so the economics of the sale do not move with rates afterwards.
Country risk transferred
The obligor’s jurisdiction becomes the forfaiter’s exposure.
Program or one-off
Run a single transaction, or set up a program with recurring suppliers and a nominated bank.
What the bank will ask for
Uploaded once, against the deal, and visible only to the counterparties on it.
Questions
How is this different from LC discounting?
Discounting is usually with recourse and short-dated; forfaiting is a without-recourse purchase, typically over longer tenors, and the asset leaves your books.
Does the obligor need a bank guarantee?
Not always, but an aval or guarantee from a bank widens the field of forfaiters willing to bid and improves the discount.
Can it run as a standing facility?
Yes. An exporter shipping repeatedly into the same market runs a Forfaiting Program; where the buyer sets it up instead, it is the Forfait Reverse Program.
Related
Forfaiting Program
A revolving without-recourse purchase facility for an exporter shipping repeatedly into the same market.
ProgramForfait Reverse Program
Buyer-initiated forfaiting: the buyer stands up the program and its suppliers are bought out without recourse.
ProductLC Discounting
Turn an accepted deferred-payment credit into cash today, at a discount rate banks bid for.