Caterpillar Tractor sells heavy construction equipment to a Polish firm.In return,the Polish firm issues a promissory note to Caterpillar promising to pay for the equipment over a five-year period.Caterpillar sells the note to Deutsche Bank at a discount.Caterpillar has used

Question

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This is an example of forfaiting, a specialized form of international trade financing where the exporter (Caterpillar) sells its accounts receivable (the promissory note) to a forfaiter (Deutsche Bank) at a discount, who then takes on the risk of collecting payment from the importer (Polish firm) in exchange for a fee. This allows the exporter to receive immediate cash flow and transfer the risk of nonpayment to the forfaiter.

Caterpillar Tractor Sells Heavy Construction Equipment to a Polish Firm