How does accounts receivable factoring work
How does AR (accounts receivable) factoring work? What are the risks and benefits to the two parties involved?
Expert
Factoring is when one firm sells AR (accounts receivable) to another. The firm which is purchasing is called as a factor. The factor earns a profit by purchasing the AR at a discount. The risk is that some of the AR might default. The selling firm receives the cash it needs.
Letters of Credit: It is a binding document which a buyer can request from his bank in order to pledge that the payment for goods will be moved to the seller. Principally, a letter of credit provides the seller reassurance that he will obtain the paym
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