A form of short-term financing that is secured by a company through a recourse sale of accounts receivable to a third party. This involves either the pledging or the selling of receivables. The pledging of accounts receivable doesn’t entitle the lender only to have a claim against the receivables but also to have recourse to the borrower: If the receivables account doesn’t pay, the company that pledged the account in order to obtain financing will bear the loss. Selling accounts receivable (i.e., factoring) involves the purchase of accounts receivable by a third party (the lender or factor) without recourse to the seller (borrower). In factoring, the lender, rather than the seller, takes the loss if the factored account cannot be collected.