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 New Jersey Factoring Agreement is a financial arrangement between a business and a factoring company where the business sells its accounts receivable to obtain immediate cash flow. Factoring is a type of financing commonly used by businesses that need instant funds but are unable to wait for their customers to pay invoices. In a New Jersey factoring agreement, the factoring company purchases the accounts receivable of the business at a discounted rate, providing the business with a percentage of the invoice amount upfront, usually around 80-90%. The factoring company then collects payments directly from the business's customers. Once the full payment is received from the customers, the factoring company pays the remaining balance to the business, deducting their fees. There are several types of New Jersey Factoring Agreements, including: 1. Recourse Factoring: In this type of agreement, the business remains liable for any uncollectible invoices. If the factoring company is unable to collect payment from a customer, the business is responsible for repurchasing the invoice or reimbursing the factoring company. 2. Non-Recourse Factoring: This type of agreement removes the risk of uncollectible invoices from the business. The factoring company assumes the responsibility of collecting payments from customers, and if a customer defaults or becomes insolvent, the factoring company absorbs the loss. 3. Selective Factoring: This arrangement allows the business to choose specific invoices that they want to factor while retaining control over their remaining accounts receivable. It offers flexibility to businesses with a mixed customer base or those experiencing temporary cash flow issues. 4. Invoice Discounting: Although similar to factoring, invoice discounting is a confidential agreement where the business retains control over its accounts receivable. The factoring company provides a loan based on the value of the outstanding invoices without directly collecting payments from the customers. New Jersey Factoring Agreements are beneficial to businesses because they provide immediate cash flow, allowing them to meet operational expenses, invest in growth opportunities, and bridge cash flow gaps. It is particularly useful for small and medium-sized businesses or those operating in industries with long payment cycles.
