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What is factoring?

  • Management Dictionary
  • Corporate and Market Finance
18 views

Factoring is a financial solution that allows companies to transfer their accounts receivable to a specialized company called a factor. In exchange, the factor advances almost the entire amount of the receivables, thus improving the company’s cash flow. Once payment is received, the factor pays the remaining balance, less its fees and commissions. This practice offers companies outsourced receivables management, reducing the risk of non-payment and optimizing working capital requirements.

Keywords
  • banking, cash management, factor, factoring, financing, working capital requirements

Author(s)

CHIKH Sabrina
Docteure, Professeure associée
SKEMA Business School

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