Factoring accounts receivable is a relatively expensive source of secured short-term funds that allows firms to turn accounts receivable immediately into cash.

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Factoring accounts receivable involves paying a fee to a third-party financial institution to buy the accounts receivable from a firm, typically at a discount. While it provides immediate cash, factoring is generally a more expensive form of financing than other types of secured short-term loans or lines of credit.

Factoring Accounts Receivable Is a Relatively Expensive Source of Secured