Factoring
Category: Finance
Definition (plain English)
Factoring is selling receivables to a finance provider at a discount so the seller can receive cash before the buyer pays.
Why it matters commercially
It can ease working-capital pressure from open-account sales, but fees, recourse, buyer eligibility, and dispute deductions change the true margin.
Example
An exporter factored approved distributor invoices to fund the next production run while waiting for Net 60 customers to pay.
Common mistake
Using factoring to solve cash pressure without pricing the discount, checking recourse terms, invoice disputes, and whether the buyer is acceptable to the factor.
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