Factoring in Islam

Assalamu Alaikum

One of my customer who would like to start the factoring system to their business.
Eg: There are 3 people involves in this case. Person A ( Who buy goods) Person B ( Who sell good), Person C (Who does the factoring)

Person A buys the goods from Person B. And agrees to pay the money in 30 days due. Whereas Person B goes to Person C and show the invoice and get 75% of the money immediately. And Person A will pay the money to Person C behalf of that invoice 100%. Andf the person C releases the 25% amount which held for the invoice amount to Person B immediately.

For the factoring service, Person C charges some % like 2.5% or 5% depending upon the customers which are fixed for the invoices.

I would like to know whether this falls under interest and permissible in Islam.

Jazakhalah khiar

Assalaamu alaykum,

This type of service is not Shariah compliant. The factoring provider is essentially providing a loan, charging a fee for this in the above said manner would tantamount to Riba.

Allah knows best

Appreciate your response and will inform them accordingly.

Jazakhalah khiar