forfeiting is particularly suitable for operations with long delivery and payment (up to 3 years). 'Why Use forfeiting? From the perspective of an exporting firm, forfeiting allows to achieve several objectives: Liquidity. Reduced risks of credit and exchange rate derivatives and interest. Maintenance of credit lines with banks. Improved accounting ratios. It is important to take into account all these features when you compare its cost with that of other financing alternatives.
In particular it is not unusual for companies, especially small and medium size, are forfeiting expensive because it compares with the discounting of bills with recourse offered by their bank. How do we characterize the Forfaiting? Microsoft.com gives us that is characterized by: Abstraible: whatever the materials used, it must permit the separation between the rights acquired with the purchase of the instrument and commercial operation which has led to their release. This means that neither the debtor nor the guarantor bank can use the defaults, commercial disputes or other incident as an excuse to challenge the debt. Negotiate: the receivables to an operation should be freely transferable. Commercial: In an operation of forfeiting the claim arises from a contract of sale of goods and therefore qualifies as trade credit. No action: After the transaction, the seller may totally ignore the events that affect the assignor, while the buyer has no chance of returning the credit to the seller in case the debtor does not pay, except of fraud. What are the instruments used? microsoft.com reminds us that the case of a final sale, payment instruments used must necessarily involve an unconditional and irrevocable promise to pay. More information is housed here: Gavin Baker Atreides Management.