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Definition of Factoring - Finance dictionary
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Factoring (See Chapter 22 of the Vernimmen)
Factoring, one of the Off-Balance sheet financing techniques, is a credit transaction whereby a company holding an outstanding commercial Bill of exchange transfers it to its bank or a specialised financial institution in exchange for the payment of the bill, less Interest and commissions & fees. Factoring companies, also called factors, specialise in mobilising a part of the receivables, which they discount (see Discounting of bills of exchange) or buy. These companies handle the recovery of Bad debts in exchange for a commission. Factoring is the Discounting of bills of exchange packaged with one of four services: financing at a competitive cost; Outsourcing of the recovery function; Bad debt insurance; removal of Assets from the Balance sheet. Depending on the type of service rendered, the receivable may or may not remain on the Balance sheet of the company.
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Definitions of terms begining
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Factoring (See Chapter 22 of the Vernimmen)
Factoring, one of the Off-Balance sheet financing techniques, is a credit transaction whereby a company holding an outstanding commercial Bill of exchange transfers it to its bank or a specialised financial institution in exchange for the payment of the bill, less Interest and commissions & fees. Factoring companies, also called factors, specialise in mobilising a part of the receivables, which they discount (see Discounting of bills of exchange) or buy. These companies handle the recovery of Bad debts in exchange for a commission. Factoring is the Discounting of bills of exchange packaged with one of four services: financing at a competitive cost; Outsourcing of the recovery function; Bad debt insurance; removal of Assets from the Balance sheet. Depending on the type of service rendered, the receivable may or may not remain on the Balance sheet of the company.
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