Definition
A company that buys invoices from businesses at a discount.
Why it matters
Factors provide immediate cash and handle collections.
Where it shows up in a deal
The factor is the counterparty named in the factoring agreement, on the UCC-1 filed against your company, and on the notice of assignment your customers receive. Once invoices are sold, the factor owns them, sets credit limits on your buyers, and becomes the party your customers deal with on remittance and follow-up.
What it affects
- The factor's credit appetite determines which of your customers you can sell to on terms.
- Its collections style becomes part of your customers' experience of doing business with you.
- Reporting quality, portal usability and reserve release cadence affect your cash more than small rate differences.
- Because it buys the asset, it declines weak buyers rather than pricing for them.
The common mistake
Related terms
- Invoice FactoringSelling unpaid invoices to a factor for an immediate advance.
- Factoring AgreementThe contract that sets advance rates, fees, recourse terms and duration.
- DebtorIn factoring, the customer who owes payment on the invoice.
- Notice of AssignmentA letter telling customers to pay the factor instead of the business.
Questions about how factor affects your facility?
Call (929) 658-8087 or request a written quote — no obligation, no credit impact.
