factoring services

Factoring is often used synonymously with accounts receivable financing. Factoring is a form of commercial finance whereby a business sells its accounts receivable (in the form of invoices) at a discount. Effectively, the business is no longer dependent on the conversion of accounts receivable to cash from the actual payment from their customers, which takes place on typical 30 to 90 day terms. Businesses benefit from the acceleration of cash flow. No arbitrary line of credit amount.

Factoring is considered off balance sheet financing in that it is not a form of debt or a form of equity. This fact makes factoring more attainable than traditional bank and equity financing.

There are usually three parties involved when an invoice is factored:

There are two main types of Factoring:

Notified, or Full Service Factoring; and Confidential, or Invoice Finance.

With Notified Factoring, the clients debtors are aware of the finance facility as the Factoring Company normally does the credit control, ie collects the outstanding debts.