Difference Between Factoring And Assignment
Description
How to fill out General Form Of Factoring Agreement - Assignment Of Accounts Receivable?
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FAQ
The notice of assignment or NOA is a simple letter that the factoring company sends to the debtors. It is used to inform them that the financial rights to invoices issued by the original lender (the factoring client) are sold to and adapted by the factoring company.
Assignment of accounts receivable is a lending agreement whereby the borrower assigns accounts receivable to the lending institution. In exchange for this assignment of accounts receivable, the borrower receives a loan for a percentage, which could be as high as 100%, of the accounts receivable.
What is an assignment of an invoice? It is the process that takes place to legally assign the rightful ownership of the selected invoice to another party, typically by sending a Notice of Assignment (NOA) letter to your customer to inform them of this.
The assignment procedure makes no distinction between long-term and short-term accounts receivable, unlike factoring, which only applies to short-term accounts receivable, defined as those maturing within one year from the sale of goods or provision of services.
When a company is factoring their invoices, what they are agreeing to do is assign their accounts receivables to their factoring company, who in turn has the right to collect payments for those invoices. The Notice of Assignment is the document used to alert your customers that this change in ownership has taken place.