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Line 1: − + − + − + − + − + + + − ==Why and how it works== − − The factor pays the [[time value of money]] (minus a factor's fee) to the seller. Some factoring companies pay a certain percentage (80%-95%) instantly and pay the rest once the debtor pays the factor.
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When a business sells its accounts receivables (in the form of [[invoice]]s) to another business, the process is called '''factoring'''.
When a business sells its [[accounts receivable]]s (in the form of [[invoice]]s) to another business, the process is called '''factoring'''.
==Terminology==
==Why and how it works==
Factoring usually includes three parties:
Factoring usually includes three parties:
#The seller of the product who is waiting for his money and sells the accounts receivable
#The ''seller'' of the product who is waiting for his money and sells the accounts receivable
#The debtor who bought the product
#The ''debtor'' who bought the product
#The factor (factoring company) who buys the accounts receivable
#The ''factor'' (factoring company) who buys the accounts receivable
The factor pays the [[time value of money]] (minus a factor's fee) to the seller. Some factoring companies pay a certain percentage (80%-95%) instantly and pay the rest once the debtor pays the factor.
The main incentive for factoring is to get money instantly (instead of often having to wait 30 to 90 days for the payment), thus increasing the present [[cash flow]].
The main incentive for factoring is to get money instantly (instead of often having to wait 30 to 90 days for the payment), thus increasing the present [[cash flow]].
==Types of factoring==
==Types of factoring==