How does receivable financing differ from factoring?

Factoring is the outright sale of accounts receivable for an amount less than face value. Fees charged are generally based on the sales amount and stated as a discount percentage.

Receivable financing is the borrowing of cash against a total of eligible receivables, usually in the form of a line of credit. Fees are usually based on the average funds employed, and rates are generally stated as a monthly interest rate.

Do the customers of borrowers know if they are financing?

Although some lenders will notify customers and collect payment directly, most will try to operate transparently to the borrower's customers. A deciding factor in this is sometimes the regularity and accuracy of the borrower's financial reporting.

Who collects the checks?

In most cases the borrower, although in some cases lenders will choose to have payment sent to them directly.

How is the loan re-paid?

Customer payments are applied by the lender to the loan balance, reducing the amount owed.

What if collections exceed the loan balance?

Collections in excess of a loan balance are returned to the borrower.