Explain the concepts of factoring and forfaiting.

Question

18 Mar 2025

Answer :

Word Count : 327

Factoring and forfaiting are financial services that help businesses manage their receivables and improve liquidity. Both involve selling receivables to a third party, but they differ in scope, duration, and application.

### Factoring
Factoring is a short-term financing arrangement where a business sells its accounts receivable (invoices) to a financial institution called a factor at a discount. The factor provides immediate cash to the business, reducing the need to wait for customer payments. This helps improve cash flow and ______ _____ _____ __________ ________ ______ ________ _______ _________.
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