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Factoring Agreement With Recourse

Category:
Contracts - Factoring
State:
Multi-State
Control #:
US-00037DR
Format:
Word; 
Rich Text
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Description

A factor is a person who sells goods for a commission. A factor takes possession of goods of another and usually sells them in his/her own name. A factor differs from a broker in that a broker normally doesn't take possession of the goods. A factor may be a financier who lends money in return for an assignment of accounts receivable (A/R) or other security.

Many times factoring is used when a manufacturing company has a large A/R on the books that would represent the entire profits for the company for the year. That particular A/R might not get paid prior to year end from a client that has no money. That means the manufacturing company will have no profit for the year unless they can figure out a way to collect the A/R.

This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.

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FAQ

Full-Recourse factoring means that the vendor, not the factor, bears the risk if the retailer does not pay the invoice. Non-Recourse factoring means that the factor, not the vendor, absorbs the credit risk.

In a factoring with recourse transaction, the seller guarantees the collection of accounts receivable i.e., if a receivable fails to pay to the factor, the seller will pay. As the recovery is guaranteed by the seller, a recourse liability is determined and recorded by him.

Recourse Factoring involves pledging a company's invoices in exchange for an immediate cash advance. Any non-performing accounts receivable must be paid off by the company or the owners should the factor request payment of the non-performing accounts.

Full-Recourse factoring means that the vendor, not the factor, bears the risk if the retailer does not pay the invoice. Non-Recourse factoring means that the factor, not the vendor, absorbs the credit risk.

Recourse factoring is an arrangement where the company that factors its invoices assumes responsibility to buy back any loans that end up being uncollected or not able to be collected.

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Interesting Questions

More info

With recourse factoring, the client is prompted to buy back any invoices for which the factoring company cannot collect payments. Factoring companies usually charge a lower rate for recourse factoring than it does for non-recourse factoring.Traditionally, factors purchase accounts receivable from their clients without recourse. A. With recourse factoring, a client sells invoices to a factor, with the promise to buy back any uncollected invoices. Factoring Agreement - Table of Contents (based on 2 contracts). Most factoring agreements relate to recourse factoring. Every factoring company will have a slightly different definition of recourse. As you can see, from a balance sheet standpoint, a non-recourse factoring solution may be very attractive.

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