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Factoring, Forfaiting And Trade Receivables Discounting (Treds)
What is factoring in trade finance?
Factoring is a financial arrangement where a business sells its trade receivables (invoices) to a third party called a factor at a discount, receiving immediate cash instead of waiting for the debtor to pay.
What is the primary purpose of factoring as a financial service?
Converting trade receivables into immediate cash for businesses.
Who are the three parties involved in a factoring arrangement?
The three parties are the seller (client), the buyer (debtor), and the factor (usually a bank or NBFC that purchases the receivables).
What is 'advance factoring' in trade finance?
Factor pays a percentage of invoice value upfront before collection.
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