Factoring accounts receivable has all of the following characteristics except:

Question

Quizplus · Accepted Answer

Factoring accounts receivable involves selling the receivable to a third party, known as the factor, for a discounted amount. The factor then collects the payment from the customer. It is not a loan against accounts receivable, as the borrower is selling the receivable and receiving immediate cash. A and B may be confused, but A is not correct as it involves a loan. C and D are correct as the payment is made to the factor and the borrower sells the receivable.

Factoring Accounts Receivable Has All of the Following Characteristics Except