In international trade, forfeiting may be defined as the purchasing of an exporter’s receivables at a discount price by paying cash. By buying these receivables, the forfeiter frees the exporter from credit and the risk of not receiving the payment from the importer.
It is a mechanism of financing exports by discounting export receivables evidenced by Bills of Exchange or Promissory Notes, without recourse to the seller (viz. exporter), carrying medium to long term maturities on a fixed rate basis (discount) upto 100 per cent of the contract value.
We shall study about this article further, in detail, in our next post.