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 factoring agreement sample with cost basis is a legally binding document that outlines the terms and conditions between a business (known as the "client") and a factoring company (known as the "factor"). This agreement allows the client to sell their accounts receivable to the factor in exchange for immediate cash flow, while the factor assumes the responsibility of collecting payment from the client's customers. The cost basis in a factoring agreement refers to the fees and charges associated with the factoring services provided by the factor. These costs can vary depending on the specific terms negotiated between the client and the factor. It is important for both parties to understand and agree upon these cost basis details before entering into the factoring agreement. There are different types of factoring agreement samples with cost basis available, tailored to meet the unique needs of different businesses. Some of these types include: 1. Recourse Factoring Agreement: In this type of agreement, the client remains liable for any unpaid invoices in case the factor is unable to collect from the customer. The cost basis typically includes a discount fee, which is a percentage of the invoice value deducted by the factor. 2. Non-Recourse Factoring Agreement: This agreement provides the client with protection against credit risks associated with customer default. If the factor is unable to collect payment from the customer, the client is not responsible for repayment. The cost basis may include higher fees compared to recourse factoring due to the increased risk borne by the factor. 3. Spot Factoring Agreement: A spot factoring agreement allows the client to factor specific invoices on a one-time basis instead of entering into a long-term contract. The cost basis may involve a higher fee compared to long-term agreements due to the temporary nature of the service. 4. Full-Service Factoring Agreement: This type of agreement provides comprehensive factoring services, including credit analysis, collection management, and invoice verification. The cost basis may be higher as it covers additional services beyond basic funding. 5. Construction Factoring Agreement: Specifically designed for construction industry businesses, this agreement considers the unique financial needs and challenges of the construction sector. The cost basis may include various fees, such as retention fees or mobilization fees, to account for industry-specific factors. In conclusion, a factoring agreement sample with cost basis is a contractual arrangement that facilitates the sale of accounts receivable for immediate cash flow. Various types of factoring agreements exist, each with its own cost basis structure tailored to specific business requirements. It is crucial for both parties to carefully review and negotiate the terms and conditions of the agreement before finalizing the deal.
