The development of factoring in banking


The development of factoring in banking follows both economic tides and an understanding of the role it plays within the asset finance market.

Invoice finance is the use of a financial services provider to supply a business capital that is owed to them from an outstanding invoice. It can still be the responsibility of the company to get this invoice paid at some point down the line. Factoring however, puts this responsibility onto the lender, who will then track down the outstanding invoice.

Risk

There has sometimes been wariness towards factoring in banking. This can be due to the collapse of large business with many outstanding invoices, which potentially leaves a bank losing huge sums of money. An example of this is in the collapse of construction company Carillion in early 2018.



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