Distinguish between the following: 'Forfaiting' and 'export factoring'.

Forfaiting is similar to cross border factoring to the extent both have common features of non recourse and advance payment. But they differ in several important respects: A forfaiter discounts the entire value of the note/bill but the factor finances between 75-85% and retains a factor reserve which is paid after maturity. The availing bank which provides an unconditional and irrevocable guarantee is a critical element in the forfaiting arrangement whereas in a factoring deal, particularly non-recourse type, the export factor bases his credit decision on the credit standards of the exporter. Forfaiting is a pure financing arrangement while factoring also includes ledger administration, collection and so on. Factoring is essentially a short term financing deal. Forfaiting finances notes/bills arising out of deferred credit transaction spread over three to five years, normally long term. A factor does not guard against exchange rate fluctuations; a forfaiter charges a premium for such risk.