: The buyer provides an upfront cash payment, typically 70% to 90% of the invoice's face value.
: A business provides its unpaid invoices for completed goods or services to the buyer. buying accounts receivable
Buying accounts receivable (AR), also known as , is a financial transaction where a third-party buyer (a "factor") purchases a company's outstanding invoices at a discount to provide that company with immediate liquidity. How the Transaction Works The process typically follows these structured steps: : The buyer provides an upfront cash payment,
It is important to differentiate between buying receivables (factoring) and borrowing against them (financing): also known as
Transfers the administrative burden of collections to the buyer.
Secures an asset that represents a completed commercial transaction. Critical Distinctions