The selling, at a discount, of medium to longer term accounts receivable or promissory notes of a foreign buyer (including those arising out of a letter of credit transaction) for immediate payment. These instruments may also carry the guarantee of the foreign government. Forfaiting emerged after the Second World War to expedite finance transactions between Eastern and Western European countries. More recently, it has become popular in Asian and Third World countries. Both U.S. and European forfaiting houses, which purchase the instruments at a discount from the exporters, are active in the U.S. market.

See factoring.

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