I believe that this is different from factoring, which as I understand it is more to deal with cash flow, this can work for businesses that have to pay out before a customer pays up. I know of somone back in the day who started a contracting recruitment firm, they would have to pay the contractors before their customers' invoices were due, factoring enabled them to do this. I don't think that factoring passes the responsability for the debt, it just helps with cash flow for a percentage of the invoice. If the customer is deliquent, the factoring company still want their money from you and will charge you for late payment.