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

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Factoring accounts receivable involves selling the accounts receivable to a third-party (the factor) who then takes on the risk of collecting the payments from the customers. This means that the risk of loss is passed on to the buyer (the factor), rather than the seller (the company selling the accounts receivable). In contrast, pledging accounts receivable involves using the accounts receivable as collateral for a loan, but the company retains the risk of loss if the customers don't pay.

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