Factoring accounts receivable
From Wikicpa
Factoring is the sale of accounts receivable. "Factors" are finance companies or banks that buy receivables from businesses for a fee and then collect the remittances directly from the customers.
Factoring, traditionally associated with the textiles, apparel, footwear, furniture, and home furnishing industries, has now spread to many other types of businesses and represents a multi-billion dollar business in the United States.
MasterCard, VISA, Diners Club, and American Express Card are a type of factoring arrangement. Factoring arrangements vary widely, but typically the factor charges a commission of from 3/4 to 1 1/2% of the net amount of receivables purchased (except for the credit card factoring which costs the retailer or restaurateur 1.5 to 3%).
