Factoring - Invoice Discounting

Factoring and invoice discounting are two financing methods that are commonly used in connection with leveraged buyouts. Accounts receivable factoring involves a business selling its accounts receivable to a third party lender, called the factor, at a discount. Invoice discounting is a similar to accounts receivable financing. It involves the assignment of accounts receivable as supposed to the sale, to a third party lender who makes a loan to the company. Both are forms of asset based lending.