Commercial finance glossary
Factor Company
The term factor company is used when referring to a business that provides a company with finance in exchange for its accounts receivable.
A factor company makes its money by buying the outstanding sales invoices of another business at a discounted rate, this is known as factoring. Factoring enables a business to improve its cash flow in order to help its expansion.
Factoring is more often associated with small to medium sized businesses. This is because factoring helps smaller organisations who usually don't have the same level of resources available to put into following up invoices. Any delay in receiving payment for a product or service can be of serious detriment to smaller businesses, but a factor company can help to reduce the impact of late payment and help the company to expand.
