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 Washington Factoring Agreement refers to a financial arrangement entered into between a business (the factor) and a third-party organization (the client or the seller) to facilitate immediate cash flow against outstanding accounts receivable. It is typically used as a means to overcome the challenge of delayed payment by customers. Under this agreement, the factor buys the invoices or accounts receivable of the client at a discounted rate, providing the client with an immediate cash advance. The factor assumes the responsibility of collecting payment from the client's customers and manages the associated administrative tasks. The Washington Factoring Agreement is governed by the laws of the state of Washington, and its terms and conditions are outlined in a legally binding contract. The agreement includes key details such as the fee structure, rates, notification requirements, and the responsibilities of both parties involved. In Washington, there are different types of Factoring Agreements that cater to varying needs and circumstances. These may include: 1. Recourse Factoring: In this type, the factor can recover the advanced funds from the client if the customer payments are not received within a specified period. The client is responsible for any bad debts or uncollected payments. 2. Non-Recourse Factoring: This format provides more protection to the client, as the factor assumes the risk of non-payment or customer defaults. If the customer fails to pay, the factor takes the loss, and the client is not liable. 3. Spot Factoring: This option allows the client to select specific invoices or accounts receivable for immediate cash advance, enabling more flexibility in managing cash flow. It is suitable for businesses with occasional cash flow gaps. 4. Whole Ledger Factoring: Under this arrangement, the factor purchases the entire accounts receivable ledger of the client, providing a comprehensive solution for managing cash flow while transferring the collection responsibilities to the factor. The choice of the specific Washington Factoring Agreement type depends on the financial position, risk tolerance, and requirements of the business seeking factoring services. It is essential for businesses to carefully review the terms and conditions of the agreement, assess the factor's reputation and financial stability, and weigh the pros and cons before entering into a Washington Factoring Agreement.
