A trade finance arrangement in which a business agrees to sell substantially all its current accounts receivable to a financial institution known as a factor for cash. The factoring arrangement covers an agreed term, usually one year, and the factor agrees during that term to purchase all approved accounts receivable as they are generated and to perform other services related to the accounts receivable. In general, there are two types of factoring: maturity factoring and collection factoring. See Practice Note, Factoring.