Factoring” and “invoicing discounting” factoring.
– Involves sale of debtors to a lender – Invoice discounting
called factor. – Involves use of debtors as a
– The factor/lender takes the collateral/security for short term responsibility for bad debts on debts borrowing
factored – the lender has no onus on bad debts.
– Lender/factor take the responsibility – The seller/borrower still have the of collection of debt. onus on debt collection.
– The buyer/debtor is notified of the – The buyer/debtor is not notified of factoring arrangement. the invoice discounting arrangement.