Just a note on "Forfeiting"
Explanation:
I realize I'm stirring this up VERY late in the game (6 years later!) - so I hope anyone who feels disturbed will please accept my apologies.
But I was looking up "Forfaiting" myself, found this proz page, and in response to several concerns regarding a comment here, I felt it would be helpful to future searchers to provide some reference material I came across regarding "Forfeiting" (note: *not* "Forfaiting")
http://www.encyclopediaofcredit.com/WebHelp/international_cr...
"Forfeiting
Exporters sometimes use forfeiting. Forfeiting, which in some ways is similar to factoring, involves the surrender by the Seller of its rights to a negotiable debt instrument(such as a promissory note, or a usance letter of credit) in return for an immediate payment from the Forfeiter. Typically, forfeiting is done with longer-term accounts receivable-typically due in one to five years and when large amounts of money(typically in millions of dollars) are involved. These longer-term accounts receivablemay carry the guarantee of the foreign government or may be covered by a letter of credit, a promissory note, or a bill of exchange."
http://www.ubs.com/1/e/ubs_ch/bb_ch/finance/trade_exportfina...
"Purchasing of claims by the bank, mainly resulting from medium- or long term export transactions. The discounted amount is being paid out without recourse on the seller of the receivables. The predominant payment instruments are bill of exchange, promissory note or documentary credits available by deferred payment. The debtor usually must secure the payment obligation by aval, by an irrevocable and assignable payment guarantee or by a documentary credit of a highly rated bank in his country."
http://www.forfeiting.com/page2.html
"A proven method of providing fixed rate export finance for international trade transactions, in recent years, forfeiting has assumed an important role for exporters who desire cash instead of deferred payments, especially from countries where protection against credit, economic and political risks has become more difficult.
Generally, the export receivables are guaranteed by the importer's bank. This allows the purchaser to discount "without recourse" to the exporter, thus taking the transaction off the exporter's balance sheet. This can have important benefits in terms of its positive effects on the exporting company's key financial ratios."
http://www.fao.org/DOCREP/006/Y5109E/y5109e08.htm (United Nations site)
Factoring is not much used for food trade finance. The forfeiting market is more important in international food trade. Forfeiting is the principal outlet for without-recourse discounting. In a forfeiting transaction, an exporter (seller) remits to a forfeiting company guaranteed debt (usually bills of exchange, promissory notes, banker's acceptances and bills of exchange, or other freely negotiable instruments, which are normally in a hard currency - US dollars, Euros and Swiss Francs are the major denominations) which results from a sale on credit. The forfeiting company pays him cash, upfront, the face value of the debt minus a discount (it should be noted that in practice, the normal mechanism is that a trading company receives, say, a 180-day letter of credit, and discounts this with his bank; the bank then sells this paper on the forfeiting market).
These are just a few examples found when researching "Forfeiting" in this context, so I'm not sure that "Forfaiting" is (the only) hard-and-fast English term.
| Kaiya J. Diannen
Australia
Specializes in field
Native speaker of: English
PRO pts in category: 11
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peer agreement (net): +3