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 Oregon factoring agreement refers to a legal contract between a business in Oregon, also known as the "factor", and another party, typically a company or individual, referred to as the "client" or "seller". This agreement allows the client to sell their accounts receivable, also known as invoices or outstanding invoices, to the factor in exchange for immediate cash flow. The purpose of an Oregon factoring agreement is to provide the client with immediate working capital. Instead of waiting for customers to pay their outstanding invoices, which could take weeks or even months, the client can sell these invoices to the factor and receive a large percentage of the invoice value upfront. This enables the client to meet their immediate financial needs, such as paying employees, restocking inventory, or investing in business expansion. There are generally two types of factoring agreements in Oregon: 1. Recourse Factoring: In this type of agreement, the client remains liable if the customers fail to pay their invoices. In case of non-payment, the factor has the right to demand the client to buy back the invoices or reimburse the cash advanced. Recourse factoring is typically less expensive compared to non-recourse factoring. 2. Non-Recourse Factoring: With non-recourse factoring, the factor assumes the risk of non-payment by the customers. If the customers fail to pay their invoices due to insolvency or other reasons, the factor bears the loss and does not have recourse to the client. However, non-recourse factoring usually involves higher fees to compensate for the added risk borne by the factor. Regardless of the type, an Oregon factoring agreement typically involves the following key elements: — Purchase of Accounts Receivable: The client agrees to sell their accounts receivable, or a portion of it, to the factor at a discounted rate. — Advances and Reserves: The factor provides an immediate cash advance, often around 70-90% of the invoice value, to the client upon purchasing the invoices. The remaining percentage, called the reserve, is held by the factor until the customers pay the invoices in full, and is then returned to the client minus the factor's fees. — Collection and Administration: The factor takes over the responsibility of collecting payments from the client's customers on the sold invoices. They handle all the administrative tasks such as sending reminders, tracking payments, and managing customer relationships. — Fee Structure: The factor charges fees for their services, generally in the form of a discount on the face value of the invoices or a flat percentage fee based on the invoice amount. These fees vary depending on the creditworthiness of the client's customers, the volume of invoices, and the chosen type of factoring. Overall, an Oregon factoring agreement provides businesses the flexibility and immediate cash flow necessary to sustain and grow their operations, even when customers have outstanding invoices. It enables businesses to take advantage of their accounts receivable, converting them into usable funds to meet their financial obligations.
