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 York Factoring Agreement is a legal contract entered into between a business (known as the "seller") and a financial institution (known as the "factor"). This agreement allows the seller to sell its accounts receivable to the factor in exchange for immediate payment. By doing so, the seller can obtain immediate working capital and overcome cash flow difficulties that may arise from waiting for customers to pay their outstanding invoices. The terms of the New York Factoring Agreement typically include the specific rights and obligations of both parties, which may vary depending on the agreement's type. There are generally two types of New York Factoring Agreements: 1. Recourse Factoring: In this type of agreement, the seller guarantees to buy back any accounts receivable that remain unpaid by the customers after a specific period, typically ranging from 60 to 90 days. The factor bears lower risk in this case, and the fees charged to the seller are relatively lower as well. 2. Non-recourse Factoring: Here, the factor assumes the credit risk associated with the accounts receivable, meaning if the customer fails to pay, the seller is not required to buy back the unpaid invoices. However, the factor's fee for assuming this higher risk is generally higher as well. In both types of factoring agreements, the factor provides immediate funding to the seller, typically a percentage (ranging from 70% to 90%) of the face value of the accounts receivable. The factor then collects the outstanding invoices directly from the customers and deducts their fees before remitting the remaining amount to the seller. Furthermore, the factor may also offer additional services such as credit analysis, collection, and accounts receivable management. It is important for businesses considering a New York Factoring Agreement to carefully review and negotiate the terms before entering into the agreement. They should consider factors such as the factor's reputation, the fees involved, the credit risk, and any other terms and conditions that may impact their financial position. It is advisable to consult legal and financial professionals to fully understand the implications and benefits of such an agreement.
