What is factoring of accounts receivable ?

Accounts receivable (AR) factoring is a way for business owners to get working capital to run their business and the peace of mind to know they’ll get paid. When a retailer places an order with you, the factoring company makes sure the retailer is creditworthy to pay for the order. They keep records of all payments and they collect payments from retailers, so you don’t have to. Even if the retailer goes bankrupt the factoring company will still pay the full undisputed amount that you are owed.

Selling tha Accounts Recievable for to a specialized Company (the factor) for a given amount of fees and Interest , under this agreement the factor will be responsible for collecting Accounts Recievable 

Factoring of accounts receivables is a transaction in which a business sells its accounts receivable, or invoices, to a third party commercial financial company, also known as a “factor.” This is done so that the business can receive cash more quickly than it would by waiting up to90 days for a customer payment. Factoring is sometimes called “accounts receivable financing.”

Selling of account receivable to other company to generate short term financing or to decreae account receivable risks also it may done to change ratios analysis which is important to attain loans