What is Receivables Financing and Factoring?

A close cousin to an ABL loan secured by AR, Receivables Financing and Factoring is typically not structured as a “loan”, but rather involve a purchase and sale agreement of the company’s receivables.

Some types of financing and factoring include:

• Ledgered A/R Lines of Credit: A hybrid approach, where the agreement is not technically a loan, but is based on purchased receivables. The credit line operates like an asset-based line of credit, with a collateral/borrowing base, instead of invoice-by-invoice.

• Re-Course Factoring: The business (borrower) must buy back any invoices that the customers fail to pay - meaning the factoring company (lender) cannot collect on.

• Non-Recourse Factoring: The factoring company (lender) assumes all risk on the A/R purchase - they’re responsible for the debt from the customer not paying the invoice.