Buying — Accounts Receivable

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

: Once the customer pays, the buyer remits the remaining balance to the seller, minus a factoring fee (usually 1% to 5% ). Key Benefits for the Parties Involved For the Seller : 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

: A business provides its unpaid invoices for completed goods or services to the buyer. 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.

: The buyer provides an upfront cash payment, typically 70% to 90% of the invoice's face value.