Diffrence between bills dicounting & factoring in financial services

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factoring receivables
companies need cash before customers pay account balances. in such situations, company may choose sell accounts receivable company specializes in collections. process called factoring, , company purchases accounts receivable called factor. factor charges between 1 , fifteen percent of account balances. reason such wide range in fees receivables may factored or without recourse. recourse means company factoring receivables agrees reimburse factor uncollectible accounts. low percentage rates offered when recourse provided.

discounting notes receivable
accounts receivable can factored, notes can converted cash selling them financial institution @ discount. notes sold (discounted) recourse, means company discounting note agrees pay financial institution if maker dishonors note. when notes receivable sold recourse, company has contingent liability must disclosed ni notes accompanying financial statements.



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