Forfaiting | Austrian Anadi Bank


What is Forfaiting?

Forfaiting is a method of trade financing involving the purchase of export receivables by a bank or finance company without any form of recourse. This means that any right of recourse against the seller of the receivables (= the exporter) is waived.

The exporter is liable for the fulfilment of the underlying contract, for the legal existence of the receivables in question, and for the authenticity of the documentation. The receivables can be documented as bills of exchange, or as letters of credit with deferred payment, or simply as outstanding accounts receivable.

Accordingly, forfaiting is a financing instrument which allows the exporter to convert a deferred payment transaction into a cash transaction through selling its export receivables at a discount. The discount rate is based on the risk assessment of the receivables in question.