Final dates! Join the tutor2u subject teams in London for a day of exam technique and revision at the cinema. Learn more


Debt Factoring

Debt factoring, also known as accounts receivable financing, is a financial transaction where a business sells its accounts receivable (invoices or outstanding payments from customers) to a third party, known as a factor, for a discounted amount. The factor then takes over the responsibility of collecting the payments from the customers.

Here's why debt factoring is important for businesses:

  • Improves cash flow: Businesses can receive immediate cash for their outstanding invoices, rather than waiting for customers to pay.
  • Reduces risk: The factor assumes the risk of collecting payment from customers, reducing the risk of bad debts for the business.
  • Frees up time and resources: Businesses can focus on other aspects of their operations, rather than chasing after unpaid invoices.
  • Access to credit: Some factors may offer credit facilities to their clients, allowing them to grow their business.

© 2002-2024 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.