Receivables finance and asset-based lending

This overview is a guide to the Banking & Finance content within the Receivables finance and asset-based lending subtopic, with links to the appropriate materials.

Invoice discounting and factoring

Receivables finance focuses on using the receivable (ie the amount owed to a party by a debtor) which is generated when goods are sold, in order to obtain finance.

In the UK, a receivables facility is typically structured as a receivables purchase facility, which can either be an invoice discounting facility or a factoring facility.

Invoice discounting and factoring are types of receivables financing whereby a company, sole trader or partnership, known as the client, sells (ie assigns) its book debts (or receivables) together with all related rights, to an invoice discounter or factor (each a receivables purchaser) at a discounted rate. The advantage to the client is that it enjoys a more predictable and liquid cash-flow cycle.

Both invoice discounting and factoring facilities involve the purchase of receivables from a client by the receivables purchaser at a discounted rate. The principal difference between the products is whether the sales ledger administration and collection functions

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