What is Factoring?

A company transferring its accounts receivable (amounts to be received from buyers) under a contract to a factor (a bank or finance company) and receiving money before the payment date. As Britannica points out, in factoring the receivables are not pledged as collateral for a loan but are sold together with the responsibility for collecting them. The factor charges a discount or commission for its service, so the company receives not the full amount of the debt but less than it.

Source: Britannica Money: factoring; Britannica Money: account receivable