Factoring

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.

A financing technique whereby a company sells its invoices, at a discount, to a factor. The factor then becomes responsible for collecting the debt.

Arrangements can be with or without recourse. Recourse factoring allows the factor to recover any losses caused by bad debts from the borrower.

See also

• Factors
• Internal factoring
• Invoice discounting
• Recourse
• Securitisation