Question

What do u mean by factoring

Answer 1

Dear Student,

Factoring is a type of financing in which factors provide intermediary services to companies. This service is that the factor buys another company's Accounts Receivables. When a seller sends its customer an invoice, the factoring company pays the seller the invoice's value at a pre determined discount. This enables the seller to meet its present and immediate cash needs. It is of various types - one of them are Recourse and Non Recourse. The Recourse factoring does not cover loss for bad debts however the Non Recourse factoring covers the full loss of bad debts.

Regards.