What is Factoring   Factoring is the act of buying or selling accounts receivables at a discount. The company which buys the accounts receivables is known as the factor. Factoring allows a business to have immediate cash on hand to manage its operations more efficiently. Factoring is converting the accounts receivable of the business into cash by selling those invoices to a factoring company for a discount.   Why Use Factoring   Availability of cash on a regular basis Factoring services are normally less expensive than maintaining an in-house credit and collection department Factoring provides working capital to help business solve their cash flow needs. Working with a factoring company is better than dealing with a bank in that your business is evaluated based on the strengths of its accounts receivables rather than your businesses financial statements.   Factoring is not a loan. No debt is incurred to you.