Identify a characteristic of factoring as a form of accounts receivable financing.

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Factoring is a form of accounts receivable financing in which a company sells its accounts receivables to a third party (the factor) for immediate cash. This quickly turns receivables into cash, providing a source of working capital for the company. However, factoring is not necessarily an inexpensive form of financing, and most factors charge a fee for their services. Interest may not be charged, but the factor may deduct a percentage of the amount advanced as a fee for assuming the risk associated with collecting the receivables. Credit agency fees are not typically imposed on factoring users.

Identify a Characteristic of Factoring as a Form of Accounts