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Buyers Guide: Factoring

Buyers Guide: Factoring

Invoice factoring is essentially a financial transaction where a company/business sells its accounts receivables (or invoices) at a discount to another company. This other company is then responsible for collecting on that invoice from the third party. There are typically three parties involved in a factoring transaction: the seller, debtor, and the factor. The seller is owed money (accounts receivable) by the debtor. The seller then sells its invoices at a certain discount to the factor (third party finance company) to get immediate cash. Ultimately, the debtor pays the full invoice amount to the factor, therefore the factor makes a percentage gain on the account.

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