Compare the Forfaiting and Factoring forms of export financing
Comparing the Forfaiting and factoring forms of export financing -
|
Sr. |
Forfaiting |
Factoring |
|
1. |
It deals with negotiable instruments like bills of lading, promissory notes etc. |
It involves accounts receivables |
|
2. |
Maturity of receivables are term medium or long-term |
Maturity of receivables are short |
|
3. |
It trades on capital goods. |
It trades on ordinary goods. |
|
4. |
Because of negotiable instrument it trades in secondary market and more liquid |
it does not trade in secondary market |
|
5. |
It can provide up to 100% of the amount of the invoices |
It provides financing only up to 80-90% of the amount of the invoices |
|
6. |
It is used only in international trade |
It is used in both domestic and international trade |
|
7. |
Letters of credit are involved |
Letters of credit are not involved |
|
8. |
Cost is borne by the overseas buyer |
Cost is borne by the seller |
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