Factoring accounts receivable, unlike pledging accounts receivable, typically passes the risk of loss on the receivable to the buyer.

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Factoring accounts receivable involves selling the receivables to a third party, who assumes the risk of loss if the customers fail to pay. In pledging, the receivables are used as collateral for a loan, and the company retains the risk of loss.

Factoring Accounts Receivable, Unlike Pledging Accounts Receivable, Typically Passes the Risk