Transfers the administrative burden of collections to the buyer.
Easier to qualify for than bank loans, as it relies on customer credit. : Earns a profit from the discount and service fees. buying accounts receivable
: The buyer takes responsibility for collecting the full payment directly from the customers. Transfers the administrative burden of collections to the
Buying accounts receivable (AR), also known as , is a financial transaction where a third-party buyer (a "factor") purchases a company's outstanding invoices at a discount to provide that company with immediate liquidity. How the Transaction Works The process typically follows these structured steps: : The buyer takes responsibility for collecting the
It is important to differentiate between buying receivables (factoring) and borrowing against them (financing):
: Once the customer pays, the buyer remits the remaining balance to the seller, minus a factoring fee (usually 1% to 5% ). Key Benefits for the Parties Involved For the Seller :
: The buyer verifies the authenticity of the invoices and evaluates the creditworthiness of the end customers (debtors) rather than the seller.