form of secured lending giving businesses short-term financing by selling their trade receivables or pledging receivables as collateral for a loan. Direct sale of accounts receivable is a nonrecourse type of financing called factoringAn accounts receivable loan from a bank is a discount: the borrower draws against a line of credit that is less than the full dollar value of his trade credits. Accounts receivable financing is a rather flexible way of obtaining credit, since borrowers' financing costs are directly related to their business cycle. Receivables financing is often priced at spreads above the bank prime rateand is relatively expensive compared to other forms of credit.
short-term financing whereby accounts receivable serve as collateral for working-capital advances.
short-term financing whereby accounts receivable serve as collateral for working capital advances.
