Factoring Agreement Meaning With Example In Chicago
Category:
State:
Multi-State
City:
Chicago
Control #:
US-00037DR
Format:
Word;
Rich Text
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Description
A factoring agreement is a financial arrangement where a business sells its accounts receivable to a factor (a financing company) to obtain immediate cash flow. For example, a Chicago-based wholesale distributor might sell its outstanding invoices to a factoring company to immediately access funds for operational expenses without waiting for customer payments. This agreement outlines key features such as the assignment of accounts receivable, the responsibilities of both parties in invoicing and collections, credit risk assumptions, and the terms of payment. Users must fill in relevant details like the names of the factor and seller, business types, and financial terms before executing the agreement. The document serves various professionals, including attorneys, partners, and legal assistants, helping them understand the financial and legal implications of receivables financing. It is also a valuable tool for paralegals and legal assistants when assisting clients in securing funding through factoring. The clear terms provide a framework that aids in the seamless processing of accounts receivable transactions.
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Documents you will have to provide: Factoring application. Articles of Association or registered Amendments to the Articles of Association of your company. Annual report for the previous financial year. Financial report (balance sheet andf profit/loss statement) for the current year (for 3, 6 or 9 months, respectively)
The factoring company assesses the creditworthiness of the customers and the overall financial stability of the business. Typically, the factoring rates range from 1% to 5% of the invoice value, but they can be higher or lower depending on the specific circumstances.