Factoring: Difference between revisions

Revision as of 10:06, 21 April 2016

The sale or transfer by a supplier of legal title to accounts receivable (invoices).

The supplier sells or transfers title to the receivables to a third party known as a factor.

The arrangement can be either with or without recourse.

Factoring is often a convenient - but relatively expensive - form of finance for weaker corporate credits.

The supplier sells its invoices, at a discount, to the factor. The factor then becomes responsible for collecting the debt.

As noted above, factoring arrangements can be with or without recourse.

Recourse factoring allows the factor to recover from the supplier/borrower any losses caused by bad debts.

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-The sale or transfer of legal title to accounts receivable to a third party (factor), either with or without recourse. Often a convenient but relatively expensive form of finance for weaker corporate credits.
+The sale or transfer by a supplier of legal title to accounts receivable (invoices).
-A financing technique whereby a company sells its invoices, at a discount, to a factor. The factor then becomes responsible for collecting the debt.
+The supplier sells or transfers title to the receivables to a third party known as a factor.
+The arrangement can be either with or without recourse.
-Factoring arrangements can be with or without recourse.
-Recourse factoring allows the factor to recover any losses caused by bad debts from the borrower.
+Factoring is often a convenient - but relatively expensive - form of finance for weaker corporate credits.
+The supplier sells its invoices, at a discount, to the factor. The factor then becomes responsible for collecting the debt.
+As noted above, factoring arrangements can be with or without recourse.
+Recourse factoring allows the factor to recover from the supplier/borrower any losses caused by bad debts.