Businesses 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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This method of raising capital is called factoring where a company assigns its accounts receivable to a collection company or bank in exchange for an immediate payment of a percentage of the total value of the accounts receivable. This allows the company to free up cash flow and receive funds for its outstanding invoices. Bond is a form of long-term debt financing where investors lend money to the business for a fixed period of time at a fixed interest rate. Indemnification is a form of protection against loss or damage. Novation is a contractual agreement to transfer rights and obligations to another party. Assignment is a legal transfer of rights from one party to another. None of these terms fit the description of this method of raising capital.

Businesses May Raise Capital by Assigning Its Existing Accounts Receivable