Receivables factoring involves the selling of a company's accounts receivables at a discount to a factor. The factor assumes the credit risk and receives payment from the debtors.
Receivables factoring is an expedient means of acquiring working capital by selling your outstanding accounts receivables for a product that has been delivered or a service that has been rendered. Receivables factoring works well for small to mid-sized companies, start-ups, and rapidly expanding companies.
The main benefit of receivables factoring is the immediate increase in working capital which, among other things, can fund expansion and growth. Due to the fact that receivables factoring is contingent upon your customer's creditworthiness, it does not matter if your company's credit is poor or not yet established.
