Forfeiting (Fr. “à forfait”: without recourse clause) describes the purchase of receivables while waiving any recourse against the seller in case of payment default (= real forfeiting – in unreal forfeiting recourse is not ruled out). However, the seller is liable for the legal existence of the receivable.
The seller of the receivable becomes the “forfeitist”, the buyer the “forfeitor”. Forfeiting is becoming increasingly important in the financial implementation of export transactions. As external financing via bank loans is becoming more difficult due to the stricter international competition and Basel II, especially for medium-sized companies, factoring and forfeiting is becoming increasingly attractive as a financing possibility. Asset financing of the complete assets on the balance sheet can be a solution.
Good to know
Factoring is a purchase, not a credit transaction. It describes the ongoing purchase of short-term, future receivables from product deliveries and services as well as their administration and debtor accounting, dunning, and collection work.