Account Receivable Factoring Law and Legal Definition

Account receivable factoring is where account receivables and invoices are the most valuable asset. "Factoring" is simply a way to finance the sales. One can sell open invoices at a small discount and may get the cash immediately. This cash can be used for almost any business expense such as paying for utility expenses, salaries, buying new equipment, or even paying for a new marketing campaign. The benefits of account receivable factoring are as follows:

• Does not have to give up equity as with investment capital or new partners.

• May take advantage of supplier early payment and volume discounts.

• The ability to make volume purchases from suppliers.

• No more offering early payment discounts to customers.

• No additional debt, factoring is not a loan. (off balance sheet)