Buying Accounts Receivable May 2026

Buying accounts receivable (AR), also known as , is a financial transaction where a third-party buyer (a "factor") purchases a company's outstanding invoices at a discount to provide that company with immediate liquidity. How the Transaction Works The process typically follows these structured steps:

Easier to qualify for than bank loans, as it relies on customer credit. : Earns a profit from the discount and service fees.

: The buyer verifies the authenticity of the invoices and evaluates the creditworthiness of the end customers (debtors) rather than the seller. buying accounts receivable

It is important to differentiate between buying receivables (factoring) and borrowing against them (financing):

: A business provides its unpaid invoices for completed goods or services to the buyer. Buying accounts receivable (AR), also known as ,

Secures an asset that represents a completed commercial transaction. Critical Distinctions

Transfers the administrative burden of collections to the buyer. : The buyer verifies the authenticity of the

: The buyer takes responsibility for collecting the full payment directly from the customers.