Factoring is a financial transaction in which a business sells its accounts receivable (invoices) to a third party, known as a factor, at a discount. The factor then collects payments directly from the customer.

A factor is a financial institution that purchases a business's accounts receivable. Red Fox Finance, with its wide panel of 79 lenders, serves as a dependable factor for businesses of all sizes.

Confidential factoring is an invoice factoring type where the business's customers are unaware of the factoring arrangement. It means that businesses retain control over their relationships with customers, and customers continue to make payments directly to the business, which then forwards these to the factor.

In non-confidential factoring, the customers are aware of the factoring arrangement. The factor takes over the debtor management process and collects payments directly from the customers.

Invoice discounting is a form of invoice financing where the business retains control over the collections process, but uses its invoices as collateral for a loan. The business pays the lender back once the customers pay their invoices.

This is the percentage of the invoice's face value that the factor provides upfront to the business. The rate typically ranges between 70% and 90%, depending on the agreement and the industry.

The factoring fee is the cost associated with the factoring service. It's often a percentage of the total invoice value and varies depending on factors like the volume of invoices, the creditworthiness of customers, and the terms of the agreement.

This is the difference between the total invoice value and the initial advance provided by the factor. The factor releases the reserve, minus their fee, to the business once the customer pays the invoice in full.

A contract between the business and the factor that outlines the terms and conditions of the factoring service, including the advance rate, the factoring fee, and the duration of the service.

Debtors are the customers who owe money to the business for goods or services provided on credit.

In recourse factoring, the business retains the risk of non-payment by the debtor. If a debtor doesn't pay the invoice, the business must repay the factor the amount advanced for that invoice.

In non-recourse factoring, the factor takes on the risk of non-payment. If a debtor fails to pay an invoice, the factor cannot demand repayment from the business.

Verification is the process by which the factor confirms the legitimacy of the invoices submitted for factoring.

The factoring period is the length of time between when an invoice is submitted to the factor and when the customer pays the invoice.