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This can be misleading because technically speaking, Accounts Receivable Factoring is not categorized as a "loan .". It does not show up as "debt" on your balance sheet. Similarly, a Merchant Cash Advance is not categorized as "debt," either. This is because both products involve a sale to the business lender.How does accounts receivable factoring work?
Accounts receivable factoring companies purchase those invoices and pay their clients a large percentage of the invoices’ value upfront. The factoring company forwards the client the balance, minus a small factoring fee, after the client’s customers pay.What does "factoring" mean in accounting?
Factoring Definition. Factoring, also known as invoice factoring, is a financial transaction in which a company sells its accounting receivables.