09-19-2011, 14:56 PM
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#1 (permalink)
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Administrator
Join Date: Jun 2009
Posts: 481
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Factoring & Forfaiting
Factoring or invoice discounting or debtor finance receivables factoring is when a company buys a debt or invoice from another company. This purchase receivables are discounted to allow the buyer to make a profit on the payment of debts. Factoring essentially transferring ownership of accounts to another party who then chases the debt.
Factoring relieves the first party of a debt for less than the total amount of working capital to continue their trade, while the buyer or factor to blame for chasing the full amount and winnings, if it is paid. The factor is required for additional fees, generally a small percentage, if the debts are paid to pay. The factor can also be a discount on the indebted party.
Forfaiting (note the spelling) is the purchase of an exporter's receivables - the amount owed to the exporters importers - with a discount for cash payment. The buyer of the receivables or forfaiter, must now be paid by the importer to pay the debt.
Since the claims are usually guaranteed by the bank of the importer, the exporter of forfaiter freed from the risk of non-payment by the importer. The claims have to be a form of security that on the secondary market, such as bills of exchange or promissory notes can be sold.
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