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.
A North Carolina Factoring Agreement is a legal contract between a business and a factoring company, which allows the business to obtain immediate cash flow by selling its accounts receivable to the factoring company at a discounted rate. This is a common financial tool used by businesses to bridge the gap between the time they issue invoices to customers and the time they receive payment. The factoring agreement in North Carolina outlines the terms and conditions of the transaction, including the responsibilities and rights of both the business and the factoring company. It typically includes details such as the amount of accounts receivable being sold, the discount rate applied, the duration of the agreement, any fees associated with the factoring services, and the payment terms. There are different types of North Carolina Factoring Agreements that businesses can choose from, depending on their specific needs: 1. Recourse Factoring: In this type of agreement, the business remains liable for any unpaid invoices if the customer defaults on payment. If the factoring company is unable to collect payment, the business must buy back the unpaid invoices. 2. Non-Recourse Factoring: This agreement shifts the risk of non-payment to the factoring company. If the customer defaults on payment, the factoring company absorbs the loss. However, the factoring company may charge a higher discount rate or be more selective in purchasing accounts receivable. 3. Spot Factoring: This is a more flexible option where businesses can choose which invoices to sell on a case-by-case basis. It allows the business to maintain control of their receivables while still accessing immediate cash flow. By utilizing a North Carolina Factoring Agreement, businesses can solve cash flow issues, take advantage of growth opportunities, and improve their working capital position. It is important for businesses to carefully consider their options, evaluate the terms and conditions, and choose the type of agreement that best suits their financial objectives and risk tolerance.
