Tuesday, March 23, 2010

Debt Purchasing

What is Debt Purchasing?

Debt purchasing is similar to credit factoring, where a third party pays money to a merchant business in exchange for future credit receivables. The difference with debt purchasing is that the third party is buying money owed to a business, I.E. a debt, rather than money which has already been paid. Debt purchasing is a useful option for businesses when clients pay late and they require the payment sooner in order to maintain acceptable cash flow.

Debt Purchasing and Other Debt-related Services

Debt purchasing is offered by companies which specialize in this area or focus on a number of business aspects involving debt, such as debt collection. Debt collectors are professionals who seek out debtors in an attempt to recover funds, in exchange for either a separate fee or for a commission based on the amount of the funds collected. These two different debt services can come in handy for businesses, keeping cash flow consistent and reducing the amount of chasing after debt which has to be performed internally.