A type of factoring (invoice discounting) in which the factor provides prepayment facility (i.e., finances the book debts) and credit protection (against uncollectible debts), while the seller of debt (also known as the client) undertakes other factoring tasks such as collection of debt from customers, sales ledger administration, etc. Businesses that have a good record of credit administration, but need temporary financial accommodation may resort to this type of factoring.

Agency factoring is equivalent to confidential factoring but it comes with an extra feature: bad debt protection.