Alongside factoring, a range of related financing forms exist — forfaiting, ABL, SCF — each solving a slightly different problem. From Factoring to Forfaiting: Which Instrument Fits Your Receivables? gives an overview.
Factoring as the starting point
Factoring finances short-term trade receivables on a rolling basis: every new invoice can be advanced again. It's the most flexible instrument of the group, suited to businesses with a continuous flow of trade receivables across multiple customers.
Forfaiting for one-off, large transactions
Forfaiting sells a specific, often large and long-term receivable (for example from an export transaction) without recourse, at a fixed discount rate. It's less a rolling financing form and more a one-off transaction, typically used for capital goods exports with payment terms spanning months to years.
ABL and SCF as alternatives
Asset-based lending (ABL) finances against broader collateral than trade receivables alone — inventory, machinery, real estate — and suits businesses with substantial assets beyond debtors. Supply chain finance (SCF), as discussed earlier, is initiated by the buyer rather than the supplier and works best in chains with one dominant, creditworthy buyer.
Practical: how to choose the right form
The choice between these instruments depends on the nature of the receivables and the financing need.
- choose factoring for a continuous flow of short-term trade receivables across multiple customers.
- consider forfaiting for a one-off, large, long-term export receivable.
- look at ABL when inventory or fixed assets can also serve as collateral.
- use SCF when a large buyer already offers a program.
- combine instruments where needed — one financing form doesn't have to cover the entire need.
What CreditCraft adds
CreditCraft maps the full range of financing forms and advises which combination best fits the specific receivables portfolio, rather than defaulting to the most familiar instrument.
Conclusion
From factoring to forfaiting: each financing form solves a slightly different problem. The right choice depends on the maturity, size, and repeatability of the receivables, not on which instrument is most well-known.