Michigan General Form of Factoring Agreement - Assignment of Accounts Receivable

• Category: Contracts - Factoring
• State: Multi-State
• Control #: US-0270BG
• Format: Word; Rich Text

Description

This form is a factoring agreement for the assignment of accounts receivable. Factoring is a financial transaction in which a firm sells its accounts receivable invoices to a third party called a factoring firm at a discount, so that it receives immediate money to continue its business. The factoring firm pays a percentage of the invoices immediately. Firms often factor receivables to improve their cash flow. Michigan General Form of Factoring Agreement — Assignment of Accounts Receivable is a legally binding document that outlines the terms and conditions for a factoring agreement between a company (the "Seller") and a third-party finance company (the "Factor"). This agreement allows the Seller to convert its accounts receivable into immediate cash by selling them to the Factor at a discounted rate. The Michigan General Form of Factoring Agreement — Assignment of Accounts Receivable covers various aspects of the factoring arrangement, including the rights and obligations of both parties involved. It ensures transparency and clarity in the transaction, protecting the interests of all parties involved. Key provisions in the agreement may include: 1. Assignment of Accounts Receivable: This section outlines the Seller's commitment to assign its outstanding accounts receivable to the Factor. By doing so, the Seller is transferring ownership and rights to collect payment on these invoices to the Factor. 2. Purchase and Sale of Accounts Receivable: This provision specifies that the Factor agrees to purchase the assigned accounts receivable from the Seller, typically at a discounted rate. The Seller agrees to sell and deliver these invoices to the Factor promptly. 3. Payment Terms: The agreement defines the payment terms, such as the payment schedule and method of remittance. It may outline whether payments are made directly to the Seller or to a lockbox controlled by the Factor. 4. Factoring Fee: This provision explains the fee structure and commission charged by the Factor for providing the factoring services. The calculation method and payment terms for the factoring fee are outlined here. 5. Reserve Account: In some cases, the Factor may establish a reserve account, typically a portion of the total invoice value, to safeguard against potential chargebacks, disputes, or bad debts. This section details the reserve account's purpose, calculation method, and release conditions. 6. Credit Protection: The agreement may include provisions for credit protection, such as credit insurance or risk mitigation measures, to protect the Factor's interests from unpaid invoices due to customer defaults or insolvency. Types of Michigan General Form of Factoring Agreement — Assignment of Accounts Receivable: 1. Recourse Factoring: In this type of factoring, the Seller retains the risk of non-payment and is obligated to repurchase any uncollected invoices from the Factor. 2. Non-Recourse Factoring: With non-recourse factoring, the Factor assumes the risk of non-payment by the customers. If the customer fails to pay, the Factor cannot seek recourse from the Seller. 3. Spot Factoring: Spot factoring allows the Seller to selectively factor a single invoice or a batch of invoices, as and when necessary, rather than entering into a long-term factoring agreement. 4. Bulk Factoring: Bulk factoring refers to a factoring arrangement where the Seller assigns a large volume of accounts receivable to the Factor, usually on an ongoing basis. In conclusion, the Michigan General Form of Factoring Agreement — Assignment of Accounts Receivable is a comprehensive legal document that regulates the factoring relationship between a company and a finance company. By understanding and incorporating the relevant provisions, the parties can establish a fair and efficient factoring arrangement that benefits both the Seller and the Factor.

Michigan General Form of Factoring Agreement — Assignment of Accounts Receivable is a legally binding document that outlines the terms and conditions for a factoring agreement between a company (the "Seller") and a third-party finance company (the "Factor"). This agreement allows the Seller to convert its accounts receivable into immediate cash by selling them to the Factor at a discounted rate. The Michigan General Form of Factoring Agreement — Assignment of Accounts Receivable covers various aspects of the factoring arrangement, including the rights and obligations of both parties involved. It ensures transparency and clarity in the transaction, protecting the interests of all parties involved. Key provisions in the agreement may include: 1. Assignment of Accounts Receivable: This section outlines the Seller's commitment to assign its outstanding accounts receivable to the Factor. By doing so, the Seller is transferring ownership and rights to collect payment on these invoices to the Factor. 2. Purchase and Sale of Accounts Receivable: This provision specifies that the Factor agrees to purchase the assigned accounts receivable from the Seller, typically at a discounted rate. The Seller agrees to sell and deliver these invoices to the Factor promptly. 3. Payment Terms: The agreement defines the payment terms, such as the payment schedule and method of remittance. It may outline whether payments are made directly to the Seller or to a lockbox controlled by the Factor. 4. Factoring Fee: This provision explains the fee structure and commission charged by the Factor for providing the factoring services. The calculation method and payment terms for the factoring fee are outlined here. 5. Reserve Account: In some cases, the Factor may establish a reserve account, typically a portion of the total invoice value, to safeguard against potential chargebacks, disputes, or bad debts. This section details the reserve account's purpose, calculation method, and release conditions. 6. Credit Protection: The agreement may include provisions for credit protection, such as credit insurance or risk mitigation measures, to protect the Factor's interests from unpaid invoices due to customer defaults or insolvency. Types of Michigan General Form of Factoring Agreement — Assignment of Accounts Receivable: 1. Recourse Factoring: In this type of factoring, the Seller retains the risk of non-payment and is obligated to repurchase any uncollected invoices from the Factor. 2. Non-Recourse Factoring: With non-recourse factoring, the Factor assumes the risk of non-payment by the customers. If the customer fails to pay, the Factor cannot seek recourse from the Seller. 3. Spot Factoring: Spot factoring allows the Seller to selectively factor a single invoice or a batch of invoices, as and when necessary, rather than entering into a long-term factoring agreement. 4. Bulk Factoring: Bulk factoring refers to a factoring arrangement where the Seller assigns a large volume of accounts receivable to the Factor, usually on an ongoing basis. In conclusion, the Michigan General Form of Factoring Agreement — Assignment of Accounts Receivable is a comprehensive legal document that regulates the factoring relationship between a company and a finance company. By understanding and incorporating the relevant provisions, the parties can establish a fair and efficient factoring arrangement that benefits both the Seller and the Factor.