A business may raise capital by assigning its existing accounts receivable to a collections company or bank in return for an immediate lump-sum percentage payment. What is this method of raising capital called?

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Factoring involves a business selling its accounts receivable to a third party (the factor) at a discount, in exchange for immediate cash. This allows the business to raise capital quickly without waiting for the receivables to be paid.

A Business May Raise Capital by Assigning Its Existing Accounts