Prefinance of financial documents (for example an invoice) which are due in the future. Forfeiting is without recourse: crediting of client is irrevocable.
Under a Trade Finance transaction buyer agreed with seller settlement in the future. Seller however needs immediate disposal of the invoice amount and agrees with his bank forfeiting. Seller’s bank pays instantly and irrevocably and is responsible for collecting the amount in the future from the buyer, a bank or other party who is liable for payment. If funds uncollectible, no refund from seller is possible. With forfeiting, risk remains with the seller’s bank. In case of an export Letter of Credit, forfeiting is based on the deferred payment undertaking by the issuing bank.