Page "Factoring (finance)" Paragraph 10

Factors often provide their clients four key services: information on the creditworthiness of their prospective customers domestic and international, and, in nonrecourse factoring, acceptance of the credit risk for " approved " accounts ; maintain the history of payments by customers ( i. e., accounts receivable ledger ); daily management reports on collections ; and, make the actual collection calls.

The outsourced credit function both extends the small firms effective addressable marketplace and insulates it from the survival-threatening destructive impact of a bankruptcy or financial difficulty of a major customer.

A second key service is the operation of the accounts receivable function.

The services eliminate the need and cost for permanent skilled staff found within large firms.

Although today even they are outsourcing such backoffice functions.

More importantly, the services insure the entrepreneurs and owners against a major source of a liquidity crises and their equity.