Invoice Financing or Factoring is where a business sells its invoices to another party (the factor) at a discount in exchange for immediate funds. For example, a business may sell its invoices to a factor that pays 90% of the face value to the company. The factor is responsible for the collection of money from customers.
Factoring is different from a bank loan because the emphasis is on income (not credit worthiness), it is not a loan and three parties are involved (not two as with a loan).
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