BANKING AFFAIRS

Detailed explanation-1: -The three parties involved in a factoring arrangement are the seller, the debtor, and the factor.

Detailed explanation-2: -There are three parties directly involved in a transaction involving a factor: the company selling its accounts receivables; the factor that purchases the receivables; and the company’s customer, who must now pay the receivable amount to the factor instead of paying the company that was originally owed the money.

Detailed explanation-3: -Definition: Factoring is a type of finance in which a business would sell its accounts receivable (invoices) to a third party to meet its short-term liquidity needs. Under the transaction between both parties, the factor would pay the amount due on the invoices minus its commission or fees.

Detailed explanation-4: -The sale can be both domestic as well as international. In domestic factoring, there are three parties involved in the transaction – namely the buyer, seller and the intermediary (the factor) while in international factoring there is a seller, an import factor, an export factor and a buyer.

Detailed explanation-5: -Export factoring − It involves four parties, the exporter, the export factor, the import factor and the importer. It is also called as cross border factoring.