Forfaiting Glossary

Glossary Items beginning with : F

Factoring

The purchase of a seller’s debts, usually with recourse, by a factoring company which then undertakes all credit control, collection and sales accounting work.

FATCA : Foreign Account Tax Compliance Act

A new United States federal law aimed at foreign financial institutions (FFIs) and other financial intermediaries to prevent tax evasion by US citizens and residents through the use of offshore accounts. It requires United States persons, including individuals who live outside the United States, to report their financial accounts held outside of the United States, and requires FFIs to report to the Internal Revenue Service (IRS) about their U.S. clients. The FATCA provisions were included in the HIRE ACT which was signed into US law on 18 March 2010.

Floating Rate

Also known as variable or adjustable rate. It is common in the trade and forfaiting market to have facilities, promissory notes, and standby letters of credit linked to a floating rate. In such facilities, the interest rate is linked to a reference rate, such as LIBOR or EURIBOR. This is less commonly used in commercial letters of credit.

Forfaiting

Forfaiting is the without recourse purchasing of future payment obligations, usually in the form of an instrument such a Letter of Credit or Bill of Exchange, at a discount or at face value in return for a financing charge.

Forfaiting Agreement

The written agreement signed by the primary forfaiter and the initial seller setting out the terms of the forfaiting transaction, in accordance to URF 800.

Forfaiting Confirmation

The secondary market document signed or to be signed by the seller and the buyer setting out the secondary sale terms in accordance with URF 800.