-An analysis of the current scenario
By Simran Jalan (firstname.lastname@example.org)
What is factoring?
Receivables form a major part of the current assets of a company and management of such receivables is the most important concern for the company. Factoring is a financial option for the management of receivables. It is a tool to obtain quick access to short-term financing and mitigate risks related to payment delays and defaults by buyers. In the process of factoring, the seller sells its receivables to a financial institution (“Factor”) at a discount. After the sale, there is an immediate transfer of ownership of the receivables to the factor. In the due course of time, either the factor or the company, depending upon the type of factoring, collects payments from the debtors. Factoring helps the company to improve the cash flows and cover the credit risk of the company. The following chart depicts the factoring process: Read more