Trade Finance & Payment
Factoring
Also known as: Invoice Factoring, Export Factoring
Factoring is a financing arrangement in which an exporter sells its short-term accounts receivable to a specialized finance company, the factor, at a discount in exchange for immediate cash. The factor advances a large percentage of the invoice value up front, assumes responsibility for collecting from the buyer, and in non-recourse arrangements also absorbs the risk of the buyer's default. Factoring converts open-account sales into working capital without waiting out the payment terms, and it is especially useful for growing exporters who sell on credit and need liquidity, effectively outsourcing credit management and collections along with the financing.
Tell your broker only if it changes who appears on the invoice. A party on the paperwork who is not party to the sale prompts valuation questions, and answering them later is harder than mentioning it now.
Related terms
Reviewed by a licensed customs broker. Definitions are general information, not legal or customs advice for a particular shipment. Duty rates, tariff programs and agency requirements change frequently.