Loading the context…
Loading the context…
Selling a right to receive payment, commonly an unpaid business invoice, to a financing provider to obtain funds before the customer pays.
Save conceptA business may deliver work before its customer pays the invoice. Receivables factoring lets it sell the right to receive that payment to a financing provider, commonly called a factor. The invoice is a receivable: money the customer owes. Selling it can give the business cash sooner to pay staff or suppliers.
The provider checks the invoice and the customer’s ability to pay, agrees the financing terms and advances funds. It then collects the payment under the agreement. The business normally receives less than the full invoice amount because the arrangement has a financing cost. Contracts differ in whether the seller remains responsible if the customer does not pay.
Suppose a business sells an undisputed J$100,000 invoice for J$97,000, with all charges included in that price. It receives J$97,000 immediately instead of waiting for the customer. When the customer pays J$100,000, the provider receives it. The J$3,000 difference is the cost in this simplified example, not a current Jamaican market rate.
Factoring changes when the seller receives money; it does not cancel the original customer’s bill or guarantee that the customer will pay promptly. It also differs from simply borrowing against an invoice while retaining ownership of it. Fees, disputed invoices, collection responsibilities and recourse against the seller matter when comparing arrangements.
Jamaican builders say late government payments discourage reconstruction work