discounting of accounts receivable |
Definition 1
Obtaining a working capital (short-term) loan against the discounted value (usually 80 to 90 percent of the invoiced amount) of accounts receivable (A/R) that meet the lender's creditworthiness criteria. The lender does not buy the A/R but only uses them as a collateral. In case of a default, however, the lender has the right to collect direct from the borrower's debtors.
Definition 2
Selling A/R at a discounted value (usually 70 to 85 percent of the invoiced amount) to a factor who then becomes responsible for collecting them. See also factoring.
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discounting of accounts receivable is in the Accounting & Auditing and Banking, Commerce & Finance subjects.
discounting of accounts receivable appears in the definitions of the following terms: factoring and asset-based lending
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