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Debt Factoring

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Debt Factoring

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
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  • October 23, 2015 at 6:17 pm #278602
    Muslim Farooque
    Member
    • Topics: 190
    • Replies: 134
    • ☆☆☆

    I want to understand the concept of debt factoring , is it like a sort of a loan in substance for the company selling of their debt ?

    October 24, 2015 at 7:58 am #278672
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22698
    • ☆☆☆☆☆

    Yes, sort of. Secured (normally) by the entity’s receivable amount. The Receivable person pays the debt direct to the factor and that pays off the loan from the factor to the entity.

    But (normally) if the factor cannot collect within, say, 3 months, the debt comes back from the factor and the entity has to repay the factor the full amount

    Is that any better?

    October 24, 2015 at 8:17 am #278680
    Muslim Farooque
    Member
    • Topics: 190
    • Replies: 134
    • ☆☆☆

    Thanks a lot Sir

    October 24, 2015 at 3:10 pm #278730
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22698
    • ☆☆☆☆☆

    You’re welcome

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