Factoring is a complete financial package that combines working capital financing, credit risk protection, accounts receivable book-keeping and collection services. It is offered under an agreement between the so-called ‘factor’ and a seller.
Under this agreement the factor buys the seller's accounts receivable and takes on responsibility for the buyer's ability to pay. If the buyer is unable to pay, the factor will pay the seller.
International factoring means the seller and buyer are in different countries. Domestic factoring began in the US in the mid 19th century. International factoring started in the 1960s, with European countries as the pioneers.
FCI was established in 1968 and was the main organisation to spread the use of international factoring around the world.