A factor is an intermediary agent that provides cash or financing to companies by purchasing their accounts receivables. In this video, you'll learn a simple way to understand this concept through an easy and brief explanation. Sometimes companies can experience cash flow shortfalls when their debts or bills exceed their revenue generated from sales. By selling account receivables for an injection of cash, factoring can help companies improve their short-term cash flow. Companies can sell their receivables to a factor and receive cash.