Forfaiting in Australia 2025: Export Finance, Risk Management & Growth

As Australian exporters face unpredictable global markets and tighter credit conditions in 2025, a quietly powerful tool is emerging in trade finance: forfaiting. While letters of credit and invoice factoring tend to grab the spotlight, forfaiting offers a unique blend of risk mitigation and immediate liquidity—tailor-made for businesses navigating international sales. If you’re looking to accelerate cash flow and remove the headaches of cross-border payment risk, here’s why forfaiting deserves your attention this year.

What Is Forfaiting and How Does It Work?

Forfaiting is a financial transaction where an exporter sells its future receivables (usually promissory notes or bills of exchange) at a discount to a forfaiter—typically a bank or specialist finance company. The forfaiter assumes 100% of the payment and political risk, paying the exporter up front. Unlike factoring, forfaiting is used exclusively for international, medium-to-long-term trade deals and is always non-recourse, meaning the exporter is off the hook if the overseas buyer defaults.

• Scenario: An Australian machinery manufacturer ships $2 million worth of equipment to a buyer in Vietnam, payable in 12 months. Rather than wait for payment, the manufacturer sells the receivable to a forfaiter, receives immediate cash (minus a discount), and lets the forfaiter chase the payment from the Vietnamese buyer.

• Instruments: Typically, receivables are secured by bills of exchange, promissory notes, or deferred-payment letters of credit—often guaranteed by the buyer’s bank.

• Typical Tenors: 180 days to 7 years, suitable for capital goods, infrastructure projects, and large-scale exports.

Why Forfaiting Is Gaining Momentum in 2025

Several trends are converging to make forfaiting especially relevant for Australian exporters right now:

• Global Payment Delays: Supply chain disruptions and persistent inflation in key export markets are increasing payment delays and defaults, putting pressure on exporters’ working capital.

• Rising Interest Rates: With the RBA holding rates at a decade high in early 2025, traditional bank loans are more expensive and harder to access, especially for mid-market exporters.

• Government Policy Support: The Australian Government’s Export Finance Australia (EFA) has ramped up guarantees for trade finance, making it easier for banks to provide forfaiting solutions, particularly for emerging markets in Southeast Asia and Africa.

• Digital Trade Documents: The 2024 launch of the Australian Digital Trade Platform is making it simpler for exporters to digitise negotiable instruments, reducing paperwork and accelerating forfaiting transactions.

This cocktail of factors is driving more businesses—especially those exporting mining equipment, agri-tech, and renewable energy solutions—to adopt forfaiting as a core cash flow strategy in 2025.

How Forfaiting Compares: Pros, Cons, and Real-World Impact

Forfaiting isn’t a one-size-fits-all solution, but it fills a vital gap in the Australian finance ecosystem. Here’s what sets it apart:

• Immediate, Non-Recourse Cash: Exporters get paid up front and offload all risk—no chasing foreign buyers or worrying about political upheaval in the buyer’s country.

• Balance Sheet Benefits: Receivables are removed from the books, improving financial ratios and freeing up credit lines for other purposes.

• Cost: Forfaiting is generally more expensive than invoice factoring or traditional loans, with discount rates in 2025 ranging from 4.8% to 8.5% depending on buyer risk and tenor.

• Eligibility: Only available for export transactions with clear, enforceable payment instruments and—often—a bank guarantee from the importer’s country.

Example: In 2025, a WA-based agritech exporter secured a $5 million contract with a South African distributor. By forfaiting the receivable (with the buyer’s bank guarantee), the business received nearly the full contract value up front, insulated itself from currency swings, and reinvested in R&D for the next season—while the forfaiter managed collection in South Africa.

Key Steps to Access Forfaiting in Australia

• Structure Your Deal: Ensure your contract allows payment by negotiable instrument (e.g., bill of exchange or deferred L/C) and, where possible, secure a guarantee from a reputable bank in the buyer’s country.

• Find a Forfaiter: Approach major Australian banks with trade finance arms (such as ANZ, NAB, or Westpac) or specialist firms like EFA-accredited forfaiters.

• Negotiate Terms: Discuss the discount rate, documentation requirements, and payment schedule. Leverage EFA support where available for emerging market transactions.

• Execute and Get Paid: Once documents are approved, receive your discounted payment and let the forfaiter handle the rest.

With digital trade documentation and expanding government support, the process is more accessible and transparent than ever in 2025.