Question

While a loan must be repaid, factoring is the selling of _____ to a finance company who then assumes responsibility for collecting the accounts.

Answer 1

The correct answer is accounts receivable.

While a loan must be repaid, factoring is the selling of accounts receivable to a finance company who then assumes responsibility for collecting the accounts.

What is factoring?

• Factoring is concerned to a kind of financial transaction. It is also a type of a debtor finance.
• In factoring a business sells it accounts receivable to another party at a lower cost or at a discount.
• It is usually used in international trade finance.
• It is also known as invoice factoring, accounts receivable factoring, or also as receivable financing.
• In factoring there are three different parties directly involved.
• The whole process highly confidential.

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