Factoring
Factoring generally refers to the sale of trade receivables prior to their becoming due (directly after invoicing). The buyer is the factor.
The factor funds the customer in return for assignment. Any further functions he may assume for the company depend on the respective agreement: in case of full-service or non-recourse factoring the factor takes on bad debt losses (credit protection) and receivables management. Factoring without assumption of bad debt losses (without credit protection) is called ‘recourse factoring’. Should the customer insist on full credit protection while taking charge of the receivables management himself, the term ‘bulk’ or ‘in-house factoring’ is used.