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 Georgia Factoring Agreement is a financial arrangement where a business sells its accounts receivable to a factoring company in order to obtain immediate cash flow rather than waiting for the customers to pay their invoices. This arrangement allows businesses to access working capital, which they can use to cover operational expenses, invest in growth, or bridge gaps in cash flow. In a Georgia Factoring Agreement, the factoring company typically purchases the accounts receivable at a discount, typically ranging from 70% to 90% of the total amount. The factoring company then assumes the responsibility of collecting payments from the customers. Once the customers pay their invoices, the factoring company deducts its fees and advances the remaining amount to the business. There are different types of Georgia Factoring Agreements, categorized based on the structure of the agreement and the relationship between the factoring company and the business. These types include: 1. Recourse Factoring: In this type of agreement, the business remains liable if the factoring company is unable to collect the payment from the customers. The business is responsible for repurchasing the unpaid invoice or reimbursing the factoring company for the amount advanced against that invoice. 2. Non-Recourse Factoring: Unlike recourse factoring, in this type of agreement, the factoring company assumes the risk of non-payment by customers. If a customer fails to pay, the factoring company absorbs the loss and the business is not responsible for repurchasing or reimbursing the factoring company. 3. Spot Factoring: This type of agreement allows businesses to select specific invoices for factoring, rather than factor all their accounts receivable. Spot factoring provides flexibility and allows businesses to address immediate cash flow needs without committing to long-term agreements. 4. Invoice Discounting: While similar to factoring, invoice discounting is a type of agreement where businesses borrow against the value of their invoices. Unlike factoring, the business retains control over the collection process and continues to collect payments from customers. Once the customer pays, the business repays the borrowed funds along with any applicable fees or interest to the invoice discounting company. 5. Construction Factoring: This specific type of factoring is designed for construction companies or contractors. It involves the financing of construction-related invoices, providing funding to cover project costs, equipment purchases, payroll, and other expenses. Overall, a Georgia Factoring Agreement provides businesses with a flexible financing option, enabling them to improve cash flow, reduce dependency on customer payments, and accelerate growth.
