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    Fctor or pledge their receivables

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    Why would a company want to factor or pledge their receivables if they have to give up 10% or more of the funds owed them by their customers?

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    Factoring or pledging is important tool of working capital management. "Pledging is placing accounts receivable as collateral for a loan (typically from a bank or finance company). Factoring is physically selling accounts receivables (also to a bank or finance company) as a way of speeding up the receipt of cash. The purchaser of the receivables is known as a factor.
    "Sometimes, using accounts receivable ...

    Solution Summary

    Solution discusses factor or pledge receivables