West Virginia Factoring Agreement

State:
Multi-State
Control #:
US-00037DR
Format:
Word; 
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Description

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.

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FAQ

A factoring agreement is a financial contract that details the full costs and terms of purchasing a business's outstanding invoices. When a business and a factoring company decide to start the invoice factoring process, they enter a factoring agreement.

Related Content. Where a company which supplies goods or services on credit assigns, by way of legal assignment, its unpaid invoices (that is, book debts or other receivables) to a finance company (factor) at a discount for immediate cash to provide working capital.

Factoring companies make money by charging a fee, usually a flat percentage of each invoice you factor. Generally, fees range from 1.15% to 3.5% per month. This can vary based on the type of factoring you choose and the number of invoices (and dollar amounts) of each invoice you factor.

To make money, factoring companies charge factoring or factor fees (sometimes also called discount rates). These fees tend to fall anywhere between 1% and 5% of the total invoice amount.

Factoring allows a business to obtain immediate capital or money based on the future income attributed to a particular amount due on an account receivable or a business invoice. Accounts receivables represent money owed to the company from its customers for sales made on credit.

In algebra, 'factoring' (UK: factorising) is the process of finding a number's factors. For example, in the equation 2 x 3 = 6, the numbers two and three are factors.

Factoring contracts have a minimum term, plus a notice period for exit. These will determine what you need to do next, although you may be able to terminate it regardless of the terms if you pay a financial penalty. Most contracts are detailed in their instructions for termination.

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.

All factoring companies require written notice to terminate the contract. The expectation is usually 30 60 days prior to the renewal date. You will need to verify whether your notice to terminate needs to be delivered via mail or if electronic notice is acceptable.

Average factoring costs fall between 1% and 5% depending on the factors above. Volume plays a huge part in calculating factoring rates. Larger monthly amounts factored equal lower fees. Many factoring companies offer volume discounts.

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West Virginia Factoring Agreement