Factoring is one of the oldest forms of financing and is still relevant to almost all businesses across the globe.

It is a financing arrangement that enables a business to sell its account receivables (ie. outstanding monies owed to that business) to third parties at a discounted price. These third parties are typically banks or financial institutions, also known as factors. A company would agree to sell and assign its receivables to the factor, prior to their due date, at an agreed discounted rate. The discount accounts for the risk of non-payment.