Debt Factoring is a service in which the factor normally purchases accounts receivable of a business services or goods seller as a mechanism for providing short-term finance on a continuing base. The accounts receivables are the sum of yet unpaid sales invoices.
Debt Factoring allows the factor to acquire the right to receive payment from the debtor of the business in due course by making cash payment. For providing
Debt Factoring services, the factor acquires debts at a discount against the amount to be collected. In
Debt Factoring, the factor may provide bad debt protection by absorbing losses incurred by a customer`s inability to pay. The factor usually sets credit limits for customers of
Debt Factoring services. Importantly, the factor sometimes expect the client to absorb some of any loss. The smaller financial companies offering
Debt Factoring services, not always but, often arrange bad debt protection through a trade credit insurance company.
