Mezra Forfaiting – What is forfaiting ?
lOnce the exporter
becomes the bona fide owner of the notes, it can sell them to a third party at a discount from their face amounts, for
immediate cash payment. This
sale is without recourse to the exporter, and
the buyer of the notes assumes all of the risks. The buyer’s security is the guarantee of the importer’s bank. The notes can be denominated
in U.S. Dollars or
almost any major currency.
lA commitment to
purchase the notes from the exporter can
(and in many cases should) be made in advance, to lock into available country limit capacity, and as a hedge against rising interest
rates.