Financial Guides, 2003; and J.G.Siegel, N.Dauber & J.K.Shim, "The Vest Pocket CPA", Wiley, 2005. The factoring transaction is often structured as a purchase of a financial asset, namely the accounts receivable. A non-recourse factor assumes the "credit risk" that an account will not collect due solely to the financial inability of account debtor to pay. In the United States, if the factor does not assume the credit risk on the purchased accounts, in most cases a court will recharacterize the transaction as a secured loan. When a company decides to factors account receivables invoices to a principles factors or broker, it needs to understands the risks and rewards involved with factoring. Amount of funding can vary depending on the specific accounts receivables, debtor and industry that factoring occurs in. Factors can limit and restrict funding in such occasions where the debtor is found not credit worthy, or the invoice amount represents too big of a portion of the business's annual income. Another area of concern is when the cost of invoice factoring is calculated. It's a compound of an administration charge and interest earned overtime as the debtor takes time to repay the original invoice. Not all factoring companies charge interest over the time it takes to collect from a debtor, in this case only the administration charge needs to be taken into account although this type of facility is comparatively rare. There are major industries which stand out in the factoring industry which are: 1. Distribution 2. Retail 3. Manufacturing 4. Transportation 5. Services 6. Construction However, most businesses can apply invoice factoring successfully to their funding model. Common factoring terms Discount rate or factoring fee The discount rate is the fee a factoring company charges to provide the factoring service. Since a formal factoring transaction involves the outright purchase of the invoice, the discount rate is typically stated as a percentage of the face value of the invoices. For instance, a factoring company may charge 5% for an invoice due in 45 days. In contrast, companies that do accounts receivable financing may charge per week or per month. Thus, an invoice financing company that charges 1% per week would result in a discount rate of 6–7% for the same invoice. Advance rate The advance rate is the percentage of an invoice that is paid out by the factoring company upfront. The difference between the face value of the