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Factoring

In the export trade: the financial service consisting of the granting of a cash advance against accounts receivable from foreign customers. More generally, a range of financing and risk management services offered by specialised firms, called factors, to sellers/exporters, particularly those who deal with a stream of low-value, short-term foreign accounts receivable. The exporter transfers title to its foreign accounts receivable to a factoring house in exchange for cash at a discount from the face value. Other basic services offered by factors include: foreign credit risk assessment, collection of overdue foreign accounts, and administration of accounting ledgers.

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