Factoring is accomplished on a discounted value of the receivables pledged.

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Factoring companies typically advance a percentage of the face value of the receivables, commonly around 80-90%, which is based on the discounted value of the receivables. This takes into account factors such as the creditworthiness of the customers, payment terms, and other risks associated with collecting the outstanding balances. The factoring company earns their profit by retaining the difference between the discounted value and the actual amount collected from the customers.

Factoring Is Accomplished on a Discounted Value of the Receivables