A specialized financial intermediary, known as a , will buy accounts receivable for less than their face value . This transaction, called factoring , allows a business to receive an immediate cash advance on unpaid invoices instead of waiting for customers to pay according to their credit terms. How the Purchase Price is Determined
The amount a factor pays is primarily split into two parts: an upfront and a remaining reserve released after the customer pays. Factoring of Receivables - IRS a factor will buy accounts receivable for