Factoring is a transaction whereby a company’s receivables are immediately transformed into cash. The receivables used through factoring are usually the amounts related to issued and outstanding invoices to customers for goods and sold services.
Legally, factoring consists of a commercial credit agreement involving a specialized entity that finances issued and outstanding invoices, called a factor, and a commercial company interested in securing its working capital, called the adherent. The factor can be a bank or a non-bank financial institution, and the adherent can be any commercial company that issues invoices with payment terms.
