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A process of purchasing a negotiable instrument without recourse to previous holders, the credit of the negotiable instrument normally having been strengthened by the additional of an aval.

A forfaiter, usually a bank or a non-bank financial institution, provides forfaiting services.

The forfaiting agreement sets out the arrangement between the initial seller and the primary forfaiter.

Forfaiting is sometimes known as 'bill discounting'.

One application is the discounting - without recourse - of a promissory note, bill of exchange or letter of credit received from an overseas buyer by an exporter.

Forfaiting purchases qualified, select, individual transactions (in contrast with factoring which normally purchases all of a firm's receivables).

See also