Popular Terms
Short-term, non-bank financing of accounts-receivable. It is of four main types: (1) In maturity factoring (also called service factoring), the factor maintains the seller's sales ledger, controls credit, follows up on the payments, and pays the amount (after deducting a commission) of each invoice as it falls due, whether or not the payment was collected. (2) In finance factoring, the factor (called the financing factor) advances funds to a producer or a manufacturing firm, on the security of produce or goods that will be produced or manufactured utilizing those funds. (3) In discount factoring (also called service plus finance factoring) the factor advances a percentage (usually between 70 to 85 percent of the value of accounts receivable) to the seller on a non-recourse basis and assumes the full responsibility of collecting the debts.
(4) In undisclosed factoring, a factor buys the goods from a primary party (producer, manufacturer, or seller) and then appoints the same party as its agent to resell those goods and to collect the payments. This arrangement prevents the disclosure that goods are being sold under a factoring agreement. The undisclosed factor, as in all other types of factoring, remains liable for uncollectible payments. Factoring is a type of 'off balance sheet financing.' See also discounting of accounts receivable and forfaiting.

Use 'factoring' in a Sentence

In school, the thing I dreaded most was math and I could not stand factoring because of how hard it was.
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You must be good at factoring all costs before you start a project so you will know if you can make it be profitable.
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The factoring that was used by the accountant was wrongly applied to our arm of the business. We had a better way of doing things.
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