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.