What is Securitization Factoring?
Securitization factoring enables companies, particularly larger businesses, to transform their receivables into immediate cash while shifting the associated risk of those assets to investors. Consequently, securitization factoring can enhance business liquidity and provide greater access to capital for growth and operational requirements.
Securitization factoring differs from receivables factoring in that securitization involves a financial institution creating an instrument, a pool, or a portfolio of receivable assets that can be traded in the open financial market.
The process involves three main entities: the company that owns the receivables, the financial institution responsible for packaging those assets, and typically an institutional investor who buys the securitized portfolio.
In contrast, with factoring, the business that holds the receivables sells them to a factoring company, transferring all responsibilities to the factor, including collections.
More Information