BANKING AFFAIRS

Detailed explanation-1: -There are three parties directly involved: the factor who purchases the receivable, the one who sells the receivable, and the debtor who has a financial liability that requires him or her to make a payment to the owner of the invoice.

Detailed explanation-2: -The three parties involved in a factoring arrangement are the seller, the debtor, and the factor.

Detailed explanation-3: -Factoring is a financial transaction where a company sells it receivables (invoices) to a factor, who collects the payments directly from the business’ customers. Most businesses choose this option if they want to receive their cash up front instead of waiting the duration of the agreed payment terms.

Detailed explanation-4: -Debt factoring is when a business sells its accounts receivables to a third party. That third party pays the business a percentage of the total amount originally charged to the client and usually takes full responsibility for collecting the payment from the buyer.

Detailed explanation-5: -A factor is a specialized financial intermediary who purchases accounts receivable at a discount. Under a factoring agreement a company sells or assigns its accounts receivable to a factor in exchange for a cash advance. The factor typically charges interest on the advance plus a commission.