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Definition

A mechanism for financing a business by selling its debtors' book to a financing company, known as a "factor", usually at a significant discount. This method of finance is usually far more expensive than bank finance because the factor is taking the risk that he will not be able to collect the debts. In South Africa, a listed company, Transaction Capital (TCP) buys the debtors books of companies where they are having difficulty in collecting. They pay a very low price for these debtors books (usually less than 50% of their face value) and then set about finding the debtors and collecting the debts. It is a highly profitable business for TCP.

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