Factoring Agreement Form For Employees In Houston
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Accounts receivable (A/R) factoring, often referred to as invoice discounting, is a type of short-term debt financing used by some business borrowers. The transaction takes place between a business (the borrower) and a lender (often a factoring company as opposed to a traditional commercial bank).
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.
Expense Recognition: The factoring expense, which includes the discount taken by the factoring company and any additional fees, should be recorded as an expense in the income statement. This expense directly affects the net income of the business.
