Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business. Factoring differs from a bank loan in three main ways. First, the emphasis is on the value of the receivables (essentially a financial asset), not the firm’s credit worthiness. Secondly, factoring is not a loan – it is the purchase of a financial asset (the receivable). Finally, a bank loan involves two parties whereas factoring involves three.
Accounts Receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms or payment terms. Accounts receivable departments use the sales ledger.
Global Supply Chain Finance refers to the set of solutions available for financing specific goods and/or products as they move from origin to destination along the supply chain.
Reverse Factoring is factoring between the supplier and the importer/exporter. The manufacturer or supplier receives payment for goods earlier.
Trade Finance is the financial relationship between an exporter/supplier and importer/buyer. Trade finance activities are conducted to reduce the risk for both parties and ensure both are paid in a timely fashion to maintain and operate their businesses.
* Indicates definition taken from Wikipedia