Forfaiting vs Letter of Credit Discounting: Key Differences
How forfaiting and Letter of Credit discounting differ in recourse, tenor and documentation.
Reviewed by LCCheck team (owner-approved) · 2026-10-12
Short answer
Both turn a future Letter of Credit payment into cash now. Discounting is usually a bank buying a usance payment obligation under a credit, sometimes with recourse to the exporter. Forfaiting is the purchase of receivables, typically without recourse, often for medium-term tenors and governed by agreements such as the ICC's URF 800.
| Discounting | Often with recourse; short tenor |
|---|---|
| Forfaiting | Usually without recourse; can be longer tenor |
| Rules | URF 800 for forfaiting |
Compare
- Recourse: forfaiting usually without; discounting may be with.
- Tenor: discounting typically under one year; forfaiting can be longer.
- Pricing: both reflect bank and country risk and time.
Ask the bank
- Is it with or without recourse?
- What documents are required?
- What happens if the issuing bank delays payment?
Sources
General guidance, not legal advice. Your bank examines documents independently.
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