EPISODE 140: Alternative Financing Factoring is a financial transaction in which a company sells its accounts receivable to a financing company that specializes in buying receivables (called a factor) at a discount. Accounts receivable factoring is also known as invoice factoring or accounts receivable financing. Two types of factoring are Transfer with recourse: the factor can demand money back from the company that transferred receivables if it cannot collect from customers, and Transfer without recourse: the factor takes on all the risk of uncollectable receivables. The company that transferred receivables has no liability for uncollectable receivables.

Topics: Requirements are an examination of your company’s financial statements, your accounts receivables, and your payables aging reports. The factoring company will also ask for information on your customers so that your receivables can be confirmed. One last note - make sure you have a written contract with customer's being factored.