Buying Accounts Receivable -

Buying accounts receivable (AR), also known as , is a financial transaction where a third-party buyer (a "factor") purchases a company's outstanding invoices at a discount to provide that company with immediate liquidity. How the Transaction Works The process typically follows these structured steps:

It is important to differentiate between buying receivables (factoring) and borrowing against them (financing): buying accounts receivable

: The buyer takes responsibility for collecting the full payment directly from the customers. Buying accounts receivable (AR), also known as ,

: The buyer provides an upfront cash payment, typically 70% to 90% of the invoice's face value. Secures an asset that represents a completed commercial

Secures an asset that represents a completed commercial transaction. Critical Distinctions

Easier to qualify for than bank loans, as it relies on customer credit. : Earns a profit from the discount and service fees.

Transfers the administrative burden of collections to the buyer.