Forfeiting - Meaning & Process 🌏

Definition: Forfeiting is a form of financing of receivables arising from International Trade (Exports). It is the Non-Recourse discounting of export bills/promissory notes.

Origin: French word "A Forfait" (To surrender rights).

Key Features:

1. 100% Financing: Exporter gets 100% value (minus discount) immediately.
2. Non-Recourse: If Importer fails to pay, Forfeiter CANNOT come back to Exporter. Risk is fully with Forfeiter.
3. Medium Term: Usually for 1 to 5 years (Capital goods exports).
4. Currency: Can be in any major currency (USD, Euro).

Parties Involved 🤝

1. Exporter: Seller.
2. Importer: Buyer.
3. Forfeiter: The Bank/Institution financing the deal.
4. Avalising Bank: Importer's bank that guarantees payment (Avalisation).

The Process 🔄

1. Exporter & Importer agree on contract.
2. Importer gets Avalisation (Guarantee) from his bank on the Promissory Notes.
3. Exporter sells these guaranteed notes to Forfeiter.
4. Forfeiter pays 100% cash to Exporter immediately.
5. Exporter walks away (No risk).
6. On due date, Forfeiter collects money from Avalising Bank/Importer.

Quiz Time! 🎯

💡 Final Wisdom: "Forfeiting turns a credit export sale into a cash sale. Exporter sleeps peacefully while Forfeiter takes the risk!" 😴🌏

Next up: Benefits of Forfeiting - The Final Lesson! 🏁