- Factoring involves the outright sale of a firm's receivables to a financial institution called a factor. The factor assumes the credit risk and manages the collection of accounts. For its services, the factor charges a commission on the value of receivables received. - Factoring creates a relationship between a seller of goods and a financial institution factor, where the factor purchases the seller's receivables and controls/administers them. The factor provides services like credit risk protection, credit financing by advancing funds against receivables, and business/financial advisory services. - In the factoring process, the seller assigns debts to the factor via an agreement. The factor evaluates client creditworthiness and provides initial credit