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Is factoring used only by companies in financial trouble?

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Is factoring used only by companies in financial trouble?

Answered By Editor


Not necessarily. Factoring provides a way to minimize the risk from bad debts. Selling your receivables has the downside that you have to discount the face value of the invoices, but the upside is that you don't have the risk that some or all of the invoices will not be paid. So it can be viewed, for example, as a way to clear unpaid invoices off the books of an otherwise viable business.

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