Factoring

The sale of a companys debts to a factor at a discount. A company that is owed money by trade debtors and faces the risk of slow payment or default on those debts, putting strain on its cash flow, can mitigate this danger by 'factoring' them. Special companies exist (factors) which will pay the company a high proportion of the amount it is owed, in return for the right to collect the debts from the debtors. The company gets a high percentage of the amount it is owed direct from the factor. The factors chase the money and keep the difference. Many banks offer factoring services.