Breaking Down The Differences Between Accounts Receivable Financing And Accounts Receivable Factoring

The primary difference between accounts receivable financing and accounts receivable factoring is simply one of “before and after”. That is to say, the former refers to the receipts you have that signify a promise to pay (by the business or consumer with whom you’re doing business), whereas the latter denotes the selling of this receipt to another company – perhaps to increase your liquidity/ immediate cash flow.

Breaking Down the Differences

If you opt to retain the accounts receivable, then it can be employed for the purposes of securing a loan based on the value of the receipts. This is aptly named financing; not factoring. Since the “property” is still in your possession, then it can form the basis of any loan that you intend to request – leaving the option of still additional clout for the determination of creditworthiness (more contributions to the accounts receivable from future business prospects). (Click Here To Learn More)