Forfaiting is the acquisition of debt obligations

Every day in our everyday life there are more and more words borrowed from foreign languages. The meaning of some is clear and understandable. Such terms quickly take root and become part of everyday speech. For example: kulniy, laptop, player, mobile and others. However, there are a number of specific terms, the nature of origin and further use of which can not be understood by everyone. The concept of forfeiting also belongs to the category of such words. What is it? In simple words, the meaning of a long foreign term can only be explained by a person familiar with economic fundamentals. The paper carriers, which reveal the structure and application of this concept, will also be able to help in this matter. Often people confuse or link factoring and forfeiting. These are two different terms that practically do not come into contact with anything. The last concept will be discussed in this article.

Nature of origin and interpretation

Forfaiting is an economic term. The native land of this word is England. It was there that such a concept as forfeit appeared, which in translation means "penalty", "fine", "payment", "lose the right". An even earlier form of this word is the French counterpart a forfai, or "entirely".

Currently, there are several options for deciphering this term. Forfaiting, for example, is a financial transaction in which an agent, or, as it is called on the market, a forfeiter acquires a commercial nature of the buyer / borrower / importer before the seller / lender / exporter. For example, an organization A needs to return 100 thousand conventional monetary units for goods delivered to it by company B. At the same time, there is no possibility to repay the debt. Then a third person can enter the situation, which will repay the loan of organization A. At the same time, company B receives its money. Organization A - postponement for payment of a loan. The agent is not only spent money, but also some percentage of future profits. The banking structure most often acts as an agent.

additional information

Thus, forfaiting is a specific form of credit, the maturity of which begins after a certain period. Typically, as a time gap takes several years. The subject of lending is trade transactions or services. The main distinguishing feature of this operation is the existence of an item on liability for risks. Forfaiter can buy promissory notes "without recourse". That is, the borrowing bank, when acquiring documents, has no right to make claims to their previous holder. As a security here, as a rule, bills of exchange are used.

Features and implementation scheme

Forfaiting - this is quite common in the West way of commercial lending. Especially popular in the UK and Germany. What are the features of the transaction? Let's see. First, the initiator of the forfeiting operation can be both the seller and the buyer. Or by common agreement. The scheme of the process is as follows:

1. The agent bank issues a number of financial conditions to the buyer.
2. The latter provides the forfaitor with securities that fully satisfy the requirements put forward.
3. Then the bank buys out debt obligations from the seller.

The documents (in their capacity are bills and drafts) provided to the agent forfeit, are evidence of receipt of the goods, and also indicate the assignment of the loan and the right to the proceeds, which is planned to be received from the sale of products in the future.

Benefits

Currently, the so-called international forfaiting is spread. The main advantage of it is the possibility of purchasing goods for cash at the moment instead of the profit that will be received in the future. The plus is also a fixed interest rate. It allows the borrower to promptly and conveniently plan the cost of the loan. In addition, the processing of documents is a very simple and quick procedure.

On the territory of the Russian Federation, the term of forfaiting transactions often exceeds the European period of several days. The reason for this is the need for specially issued permits from the Central Bank. That, in turn, should receive a request for approval of the operation. Consideration of this application takes about a month.

disadvantages

Unlike bank loans, forfeiting deals are strictly confidential. In doing so, they have their drawbacks. For example, finding a guarantor for the bank. In addition, the interest rate for such transactions is much higher than for other types of lending.

When making forfeiting deals, you should pay special attention to such items as:

1. The need for a mandatory and timely warning to the seller about the repayment of the existing debt in installments.
2. The bank should be the guarantor of a debt repayment if the buyer is not a state representative or an international company.