Factoring

Factoring Debt Receivables

Factoring is a process whereby receivables are sold for a cash price so that ownership of the future receivables is transferred to the buyer. Factoring debt receivables is a process whereby a company (or an individual) which is owed money can obtain immediate payment in some form, although the amount paid via factoring will naturally be lower than the amount of the full debt, as there is risk involved for the buyer. Many companies opt for regular debt collection instead of debt factoring.


Debt Collection versus Factoring

While factoring can make it easy to take care of debts, it is less likely to cause debtors to be more prompt with payment in the future than debt collection is, as factoring does not place any pressure on the debtor to make payment. Debt collection is also a good option for recovering a sizeable amount of the money owed, as it is possible to recover the full amount of a debt minus the commission-based fee paid to the collection agency used.