Transcript for What Is Factoring?

Karcher: What is factoring?

Factoring is the legal purchase of receivable. It's a form of off balance sheet financing often used by smaller and emerging, or high gross companies. Specifically factoring is really a terrific solution for smaller companies that are selling to larger more financially stable companies. Because what factoring allows a smaller company to do, is to leverage the credit worthiness of their customer to access capital. Some factors are quite concerned with the underlying credit of their customer base, others like PRN Funding aren't really so concerned with the credit of the customer, but really more concerned with the underlying credit of their customer - the folks that we call the account debtor.

Karcher: Does factoring affect your credit in the future?

Actually factoring can be very positive to the underlying credit of our clients. It allows them to pay their bills in a timely basis, building very good vendor relations, and very good credit. The other thing that's interesting about factoring, is that its an off balance sheet transaction, so there is no debt put on your balance sheet, so your balance sheet stays very strong.