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Debt factoring is a financial arrangement where a business sells its credit sales or debtors to a factoring company. For example, if a business has £100 million in debtors, it can sell them to a factoring company for around 90% of their value, receiving £90 million in cash immediately. The factoring company then collects on the debtors, and if they successfully recover the full £100 million, they make a profit of £10 million. For the business, the benefit is obtaining cash quickly—£90 million—rather than waiting for debtors to pay. This arrangement provides immediate liquidity, improving cash flow for the business.