Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (bills of exchange or promissory notes, or simply issued invoices, which the exporter is selling on an open account basis) to a third party at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs. A financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital. Factors are normally specialized financial services companies, but many are owned by banks. Normally, afterthe factor has purchased a receivable, the importer or buyer pays the factor directly.