Definition:

Factoring, or accounts receivables factoring is the selling of the business's accounts receivable to a factoring company. The factoring company (factor) pays the business a percentage of the value of the accounts receivable and deducts a fee for the cost of collections. Then the factor collects the receivables. One way to look at factoring is that a business is outsourcing its receivables collections process.

Also Known As: invoice factoring