Factoring

Factoring is a term used to describe the discounted sale of Commercial Accounts Receivable. In a typical factoring transaction a business sells its accounts receivable (invoices) to a third party (factoring company) for less than their actual value. This gives the business a large portion of the invoice value now to pay operating expenses, without having to wait the normal 30 days for their customer to pay the invoice. The factoring company then collects payment from the business customers directly. Factoring is normally not credit sensitive so it provides brokers with another opportunity to help start-up businesses or those with less than perfect credit. BFC’s can make 10-20% of the factors fee for the life of the relationship. This can extend several years.

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