When finance companies purchase a firm's receivables at a discount, and are responsible for processing and collecting the balances of these accounts, they act as a

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Finance companies that purchase a firm's receivables at a discount and are responsible for processing and collecting the balances of these accounts act as a factor. Factors provide financing to companies by purchasing their accounts receivable at a discount, which allows businesses to receive cash quickly rather than waiting for customers to pay their outstanding invoices. Factors then manage collections on the accounts and retain a percentage of the value of the accounts receivable as their fee for providing the financing.

When Finance Companies Purchase a Firm's Receivables at a Discount