Factoring and Forfaiting
Factoring represents the sale of outstanding receivables related to export of goods by the exporter to overseas buyers. The seller of the receivables thus transfers the risk of default on contractual obligations arising from non-payment by the buyer to a third party. The seller of the receivables is paid discounted value of the receivables, arising either from a letter of credit, guarantee or bill. Factoring is possible with recourse or without recourse. The advantages enjoyed by an exporter due to such financing are immediate payment after export. The exporter can enjoy financial benefit, in the case of without recourse, at no risks arising from the deal after factoring.