<P> However, most businesses can apply invoice factoring successfully to their funding model . </P> <P> 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 . </P> <P> 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 invoice and the advance rates serves to protect factors against any losses and to ensure coverage for their fees . Once the invoice is paid, the factor gives the difference between the face value, advance amount and fees back to the business in the form of a factoring rebate . </P> <P> Whereas the difference between the invoice face value and the advance serves as a reserve for a specific invoice, many factors also hold an ongoing reserve account which serves to further reduce the risk for the factoring company . This reserve account is typically 10 - 15% of the seller's credit line, but not all factoring companies hold reserve accounts . </P>

A transaction in which one party in the relationship benefits at the expense of the other is called