From Supply Chain Management Encyclopedia
International forfaiting is a method of trade finance that allows exporters to obtain cash by selling their medium and long-term foreign accounts receivable at a discount on a “without recourse” basis. A forfaiter is a specialized finance firm or a department in a bank that performs non-recourse export financing through the purchase of medium and long-term trade receivables. “Without recourse” or “non-recourse” means that the forfaiter assumes and accepts the risk of non-payment. Similar to factoring, forfaiting virtually eliminates the risk of non-payment, once the goods have been delivered to the foreign buyer in accordance with the terms of sale. However, unlike factors, forfaiters typically work with exporters who sell capital goods and commodities, or engage in large projects and therefore need to offer extended credit periods from 180 days to seven years or more. In forfaiting, receivables are normally guaranteed by the importer’s bank, which allows the exporter to take the transaction off the balance sheet to enhance key financial ratios.
Scheme of International Forfeiting Mechanism
-  Concluding an international sale contract between exporter and importer.
-  Delivery of goods by exporter to importer on credit.
 Concluding the contract between importer and his bank to have guarantees which will be given in respect of payment against negotiable instrument on due date.  Delivery of availed negotiable instrument either bill of exchange or promissory note to the exporter.  Concluding the forfeiting contract between exporter and forfeiter  Delivery the availed negotiable instrument endorsed without recourse in favor of the forfeiter.  Cash payment of discounted availed negotiable instrument by forfeiter to exporter (face value of bill less discount amount).  Presentation of availed negotiable instrument to the importer’s bank.  Payment on presentation of availed negotiable instrument on maturity.
- ↑ Forfaiting // Trade Finance Guide - http://www.export.gov/tradefinanceguide/eg_main_043252.asp