Factoring is a type of financial transaction in which a business sells its accounts receivable (invoices) to a third-party financier at a discounted rate. The financier then pays the business immediately, instead of waiting for customers to pay their invoices on their own terms.
Reverse factoring is the process whereby suppliers of goods and services sell their financial receivables directly into a fully collateralised supply chain finance pool or platform that is administered by a trusted third party. In reverse factoring, the financing company makes early payments to the supplier against valid invoices that have been issued, while the buyer pays either on standard terms or upon maturity according to commercial requirements.