What is the role of a factor in invoice finance?

In invoice finance, the role of a factor is to purchase invoices from businesses at a discounted rate, providing upfront cash in exchange. Unlike invoice discounting, factors actively manage the sales ledger, undertake credit control, and handle debt collection on behalf of the borrower. They act as intermediaries, bridging the cash flow gap caused by unpaid invoices by redirecting customer payments to their trust accounts. Factors may also introduce credit collection agents to ensure efficient debt recovery. Collateral requirements typically include an all-assets debenture and may involve personal guarantees or anti-fraud indemnities. Overall, factors play a crucial role in invoice finance by providing immediate working capital and assuming responsibility for the management and collection of debts.