Compare · Side by side
Factoring vs Forfaiting
Two receivables-finance techniques that are often confused.
| Question | Factoring | Forfaiting |
|---|---|---|
| Typical receivables | Often recurring short-term invoice portfolios. | Often specific future payment obligations/instruments. |
| Recourse | Can be with or without recourse. | Commonly without recourse. |
| Services | Can include collections, ledgering and debtor administration. | Focuses on purchase of payment obligations; servicing structure differs. |
| Tenor | Often shorter-term. | Can support medium-term trade obligations. |
| Credit enhancement | May rely on debtor risk/insurance. | Often strengthened by bank guarantee/aval/accepted obligation depending on transaction. |
How to use this comparison
The labels are a starting point, not a substitute for the actual wording. Before choosing a structure, ask what creates the payment obligation, who carries the credit risk, what rules apply, what event triggers payment and whether the receiving bank or financier accepts the structure.
1. Obligation
Who actually promises or is ordered to pay?
Who actually promises or is ordered to pay?
2. Trigger
What must happen before payment is due?
What must happen before payment is due?
3. Rules & documents
What wording or documentary conditions control the result?
What wording or documentary conditions control the result?
4. Bank acceptance
Will the relevant bank accept, advise, confirm, finance or process it?
Will the relevant bank accept, advise, confirm, finance or process it?