Factoring is a complete package of services in which companies assign the receivables from their domestic and international sales of goods and services to a factoring company that provides them with guarantee, receivable & collection management, and financing.
Guarantee: The seller's receivables are guaranteed up to a buyer specific limit against the risk of the buyer's insolvency or bankruptcy
Receivable Management and Collection: Monitoring and collection of all receivables are provided and reported to the seller.
Financing: A prepayment(advance payment) is made to the seller up to a specified percentage of a receivable assigned to the factoring company.