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Factoring as an investment??

Hello,

I met someone who is into something called "factoring" as a type of investing. I was wondering what this would involve and how risky could this be?? I have not seen or heard much about this anywhere and would like to get some good straightforward information about this if possible. Thanks! Steve

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Reply to
Steve
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I don't know what it is either, but I like Warren Buffett's rule of investing: If you don't understand it, don't invest in it.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Andrew Koenig

Try going to google.com and entering the following search string without the quotes: "define: factoring".

But I agree wholeheartedly with Andrew's response.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
joeu2004

The opposite should also apply...just because you don't understand it doesn't mean that it is not a valid approach. Perhaps not understanding means that it is time to learn a bit more about a new topic.

Factoring as I have seen it is giving someone a short term loan against their accounts receivable. The borrower pays off the loan as they collect the funds. The factor gets a fee for doing this. The trick comes in when the borrower ends up with a bad account that they cannot collect. Sometimes the factor takes this risk. In that case, they have to scope out the accounts carefully, and get enough return to cover the deadbeat accounts. In other cases, the borrower is responsible for covering the bad accounts. If so, the factor has to be careful to make sure that the borrower can make good on the bad accounts.

-john-

Reply to
John A. Weeks III

Thank you very much! I don't think it is something I would want to put alot of eggs into. Steve

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Steve

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