A factoring program refers to a financial arrangement where businesses sell their accounts receivable—i.e., invoices—to a third party called a factor. This sale is generally at a discount, providing the seller with immediate cash flow. The factor then takes on the responsibility of collecting the payments from the debtor(s), which is the original customer who owes money to the business. Factoring is particularly useful for businesses that require working capital and cannot wait the typical 30 to 90 days for invoice payments. In the energy commodities trading sector, where cash flow is critical to maintain operations, purchase supplies, and fulfill new orders, factoring programs can be essential for smoothing out the financial challenges associated with the timing of cash inflows and outflows.
This process can be recourse or non-recourse—where recourse means the seller is ultimately responsible if the debtor does not pay the invoice, and non-recourse means the factor assumes most of the risk of non-payment.
**Further Information on Factoring Programs**
For additional details concerning factoring programs, interested parties can access industry-specific information as well as academic resources through the following links:
1. **International Factoring Association** – The IFA provides extensive information on factoring, including resources for businesses considering a factoring program. Their website shares comprehensive data and offers training and events related to factoring: (https://www.factoring.org/)
2. **Investopedia** – Investopedia offers a range of educational articles on various financial topics, including factoring. Their content is reliable and intended to be accessible to both professionals and the general public: (https://www.investopedia.com/terms/f/factoring.asp)
Please make sure to verify that these links remain active and that they continue to provide relevant and accurate information, as websites update their content regularly.
This A.I.-generated glossary is intended to provide a convenient means to understand terminology used on this website in the context of physical commodities trading. Some terms may have alternative and/or expanded definitions that may not be relevant here and thus not included. Sources provided are for reference and not intended to be an endorsement of the broader content on that website. Suggestions, questions, or corrections can be provided in the comment box on definition pages.