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Factoring is selling the interest in a companies accounts receivables or invoices to a factor at a small discount. It is also called "account receivable financing". A company sells its accounts receivables (or invoices) that represent money due to them from their customers to a factoring company at a discount from the face value. This is done to avoid the normal "credit" period of 30-45 days for the invoice to be paid. Factoring, thus, helps companies manage its cash flow better, by allowing it to readily pay its current obligation on time and conduct its business in a normal manner.
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