Invoice Factoring is a financial transaction and a type of debtor finance. In an invoice factoring, a business sells its accounts receivable (invoice) to a third party (called a factor) at a discount. A company will sometimes factor its receivable assets to meet its present and immediate cash needs. It might also factor their invoices to mitigate credit risk.
You may also refer Factoring as accounts receivable factoring, invoice factoring, and sometimes erroneously accounts receivable financing. Accounts receivable financing is a form of asset-based lending (ABL) utilizing a company’s accounts receivable as collateral.