Factoring A financial service in which receivables are sold to a factoring firm or corporation, whose principal occupation is collecting debts for firms in return for a commission, usually a percentage of the debt. Since a firm using this service in practice sells its receivables to a factoring firm, and receives immediately the greatest part of the debt owed to it, the service may be regarded as a means of easing the cash flow and financing working capital. Factoring firms generally provide other services, such as gathering information on the financial position of a client. Discount Factoring: A percentage of the shipment, anywhere from 60% to 80% is advanced to the client. Interest is charged on the amount advanced in addition to the credit guarantee fee. Collection Factoring: Your customers’ credit is guaranteed and payment is made to you when your customer pays the factoring firm. If your customer does not pay because of financial inability. The factoring firm pays you the entire invoice amount. A fee is charged for the credit guarantee and collection service. Import Factoring: The factoring firm will open letters of credit to finance imported goods to be resold to credit worthy customers. Letters of credit for goods and advances for duty, freight, and general overhead expenses can be made.