Economics · Banking and Financial Institutions

Considering the complexities of cross-border trade, which of the following characteristics uniquely distinguishes forfaiting from international factoring?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1International factoring requires the use of physical gold as collateral, whereas forfaiting is based solely on the oral promise of the importer.
2Forfaiting is restricted to domestic transactions within the same state in India and cannot be used for exports to the USA or Europe.
3Forfaiting involves the 100 percent purchase of the receivable without any right of recourse to the exporter, typically for capital goods exports.✓
4Forfaiting is always conducted on a recourse basis, meaning the forfaiter can recover the amount from the exporter if the foreign buyer defaults.

Correct answer

Forfaiting involves the 100 percent purchase of the receivable without any right of recourse to the exporter, typically for capital goods exports.

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