what is meant by factoring??explain 3 services of factors??

Factoring refers to an arrangement under which the financial service providers known asfactorsagree to provide certain type of services to their clients.
The following are the services provided under factoring
.


i. Collecting debts on behalf of clients and discounting their bills: The clients sell their bill receivables to factors at a discount who then become responsible for getting the bills cleared.
ii. 
Verification of finances: They provide useful information regarding the financial position of the firms with which their clients wish to enter a contract. In this way, they prevent their clients from entering into contracts with firms that are in a poor financial position.
iii. Protection against bad debt: Under the non-recourse method of factoring the factor becomes responsible for the entire credit risk and pays the full amount to the client in case of any bad debts. In this way, it protects its clients from bad debts. 

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