Today, the financial loan, as the main source of cash resources, plays one of the most important roles in the stimulation of reproduction processes in the economy in the current economic activity. In this connection, the use of such types of lending, as factoring, forfeiting, leasing, lending on the basis of the documentary letter of credit become increasingly important.
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and forfeiting to learn that to protect the interests of exporters in the face of increased competition at the international markets, new forms of financing of international trade transactions, including factoring and forfeiting, has been created.
In the global banking practice, factoring is widely used as an independent form of short-term lending to foreign trade. Factoring (from Eng. factor – agent, intermediary) is associated with the retransfer by exporter unpaid by importer payment requirements for shipped goods and provided services to forfaiting company, in accordance with the right to receive payment for them. In other words, the factor buys payment requirements of the exporter, and then gets a payment from the importer.
Besides factoring, forfeiting is another form of export financing. Forfeiting is buying a debt from the lander, in the form of negotiable document.
In foreign trade lending, export factoring, as one of the alternative loan forms, has recently gained significant value. It is used mainly by medium-sized commercial enterprises and manufacturers, having regular customers among their clients. Export factoring, as a lending instrument, is unfit for export operations with the long delay in payment.
Factoring as a method of export loan is considered as selling the rights to the trade debts requirements. Export factoring is advantageous to use, if the exporter has problems with cash flow and operates on open account.
Forfeiting is lending to exporters through the purchase of promissory notes or other debt obligations. In fact, international loans, which are provided in the currency, where there is a transformation of the commercial loan in financial, as a result of which the exporter receives a number of advantages. First, it accelerates receipt of it funds on goods that are exported, and hence the circulation of the capital. The exporter is exempt from risk of non-payment and currency risk as well as risk associated with fluctuating interest rate. The company balance sheet is simplified due to the partial release of receivable accounts.
Forfeiting is one of the new forms of lending to foreign trade. It necessity is caused by rapid growth of the export of expensive equipment with a long term production, increased competition on the global markets and the increasing role of financial loan in the development of world trade. If factoring is used for lending short-term debt domestically and abroad and, as a rule, through the acquisition of all the requirements, forfaiting is a lending tool for individual export requirements, typically medium-term ones. Similarities between factoring and forfaiting consist in the fact that these techniques are used to reduce the debt in the balance sheet as a result of the requirements sale.
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