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 Wisconsin Factoring Agreement is a legal contract that involves the sale and purchase of accounts receivable by a business, providing them with immediate cash flow. It is a financial arrangement where a business sells its unpaid invoices or receivables to a third party, known as the factor, at a discounted rate. The factor then assumes the responsibility of collecting the outstanding payments from the debtors. One of the primary reasons businesses opt for factoring agreements in Wisconsin is to overcome cash flow issues caused by delayed payment terms. By selling their invoices to a factor, businesses can convert their accounts receivable into cash, enabling them to meet immediate financial obligations, invest in growth, or take advantage of business opportunities. There are several types of Wisconsin Factoring Agreements, which include: 1. Recourse Factoring: In this type of agreement, the business retains liability for any unpaid invoices if the debtor fails to make payments within a specified time. The factor purchases the invoices but can return them to the business if they remain unpaid beyond the agreed-upon period. 2. Non-Recourse Factoring: With non-recourse factoring, the factor assumes the risk of non-payment by the debtor. If a debtor defaults on payment, the factor takes the loss, and the business is not liable for the unpaid invoice. 3. Full-Service Factoring: Full-service factoring extends beyond the financing aspect and includes additional services such as credit checks on debtors, managing accounts receivable, and providing collection services. This type of factoring agreement assists businesses in streamlining their cash flow management by outsourcing these tasks. 4. Spot Factoring: Spot factoring allows businesses the flexibility to select specific invoices for factoring. This could be useful when a business wants to address an immediate cash flow need or only wishes to factor certain customers' invoices. It is important for businesses in Wisconsin considering a factoring agreement to carefully review the terms and conditions. This may include the discount rate applied to the invoices, any additional fees or charges, duration of the agreement, and the factor's reputation and reliability. Using a Wisconsin Factoring Agreement can be an effective tool for businesses to bridge the gap between invoicing and receipt of payment, ensuring their ongoing operational stability and growth.
