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.
An Arkansas Factoring Agreement is a financial arrangement between a business (known as the factor) and another party (known as the client) in the state of Arkansas. This agreement allows the client to sell its accounts receivable to the factor at a discounted rate in order to access immediate cash flow. The factor then assumes the responsibility of collecting the unpaid invoices from the client's customers. There are different types of Arkansas Factoring Agreements tailored to suit the specific needs of businesses. Some of these types include: 1. Recourse Factoring: In this type of agreement, the client remains liable for any unpaid invoices if the factor is unable to collect from the client's customers. The factor may seek reimbursement from the client for the unpaid amount. 2. Non-Recourse Factoring: In contrast to recourse factoring, non-recourse factoring provides the client with protection against bad debts. If the factor is unable to collect from the client's customers, the client is not liable for the unpaid amount. However, the factor may charge higher fees for assuming the risk. 3. Spot Factoring: This type of agreement allows the client to selectively sell a specific invoice or a batch of invoices to the factor. It provides flexibility as the client can choose which invoices to factor, depending on their cash flow needs. 4. Invoice Factoring: Invoice factoring involves the client selling all or a significant portion of its accounts receivable to the factor. It provides a steady cash flow to the client and eliminates the need to wait for customers to pay their invoices. 5. Construction Factoring: This type of factoring agreement is specifically designed for construction businesses in Arkansas. It allows construction contractors to sell their construction receivables, such as progress payments and retain age, to the factor in exchange for immediate payment. In summary, an Arkansas Factoring Agreement is a financial arrangement that enables businesses in Arkansas to access immediate cash flow by selling their accounts receivable to a factor at a discounted rate. Different types of factoring agreements, such as recourse, non-recourse, spot, invoice, and construction factoring, cater to the specific needs of businesses in different industries.
