Factoring is a financing arrangement that is typically used by small and medium-sized businesses to help them maintain a steady cash flow. As every business owner understands, cash flow is important to ensure the successful, continuous operation of their business. This is why it’s important to know the different types of factoring. In general, factoring means a company is turning over their invoices to a third party in return for receiving a portion of those invoices in cash within a few business days. Primarily, there are two types of factoring, recourse factoring and non-recourse factoring. Definition A financing method in which a business owner sells accounts receivable at a discount to a third -party funding source to raise capital. Types of Factoring Recourse and Non-recourse Factoring : In this type of arrangement, the financial institution, can resort to the firm, when the debts are not recoverable. So, the credit risk associated with the trade debts are not assumed by the facto
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