A type of factoring in which all factoring services or facilities are provided by the factor to the seller, in exception of credit protection. The factor assumes no credit risk, but rather has recourse to the seller of receivables (debt): for all trade debts overdue by 60- 90 days. Therefore, the factor is not involved in setting any credit limits or approving eligible/ acceptable customers, but only takes care of collection as well as bookkeeping (maintaining sales ledger) and providing finance.
This implies that the fees charged by the factor are limited to charges related to debt collection, bookkeeping, and interest on finance provided. However, in specific cases, including where the seller requests the factor to exhaust all options of collection such as legal proceedings (such charges are known as refactoring charges.)
