Factoring is the sale of commercial accounts receivable invoices to a buyer, or factor, at a discount, in order to obtain cash on the invoices, with the factor assuming full responsibility for credit analysis, payment collection and credit losses on the new accounts. There are usually three parties involved when an invoice is factored: the seller of the product or service who originates the invoice, the debtor is the recipient of the invoice for services rendered who promises to pay the balance within the agreed payment terms, and the factor.
(source: http://www.vendorseek.com/what-is-factoring.asp)