Debt Factoring
/ˈdɛt ˈfæk.tər.ɪŋ/
Definitions
- (n.) A financial transaction whereby a business sells its accounts receivable (invoices) to a third party (factor) at a discount to receive immediate cash.
The company used debt factoring to improve its cash flow by selling its outstanding invoices.
Related terms
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Commentary
Debt factoring should be carefully distinguished from invoice discounting, as factoring usually involves the factor taking on collection responsibility and credit risk.
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