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Factoring Options:

What is Factoring?

Factoring Benefits

Invoice Factoring

Accounts Receivable

Asset Based Factoring

Purchase Order Factoring

Business Factoring

Why Factor Receivables

Cash Flow Factoring

Factoring Glossary

Factor Receivables

Receivables Factoring

Invoice Discounting

Invoice Financing

Non-Recourse Factoring

Recourse Factoring

Freight Bill Factoring

Construction Factoring

Medical Factoring

Government Factoring

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Collection Services

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What is Factoring?

Factoring is often used synonymously with accounts receivable financing. Factoring is a form of commercial finance whereby a business sells its accounts receivable (in the form of invoices) at a discount. Effectively, the business is no longer dependent on the conversion of accounts receivable to cash from the actual payment from their customers, which takes place on typical 30 to 90 day terms. Businesses benefit from the acceleration of cash flow.

Factoring is considered off balance sheet financing in that it is not a form of debt or a form of equity. This fact makes factoring more attainable than traditional bank and equity financing.

There are usually three parties involved when an invoice is factored:

  • Seller of the product or service who originates the invoice.

  • Debtor and recipient of the invoice for services rendered who promises to pay the balance within the agreed payment terms.

  • Assignee (the factoring company)

source: wikipedia.org

 

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