Business (Y12) - Sources of finance - Debt Factoring

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6 Terms

1
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What is debt factoring?

Where a business sells sales to a third party company at a discount

2
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Is debt factoring an internal or external source?

External

3
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Is debt-factoring long-term or short-term?

Short-term

4
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What can a business do with invoices?

Wait for customers to pay or sell them to a factoring company for cash

5
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What are the benefits of debt factoring?

Can improve cash flow by having receivables quick, can focus on selling rather than collecting debt

6
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What are the drawbacks of debt factoring?

High cost due to the discount offered, customers feel like the relationship between them and the business has changed