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 Missouri Factoring Agreement is a legal contract that involves the sale of accounts receivable or invoices of a business to a third party, known as a factor, at a discounted rate. This arrangement allows the business to access immediate cash flow by converting its outstanding invoices into cash. Key terms and concepts related to a Missouri Factoring Agreement include: 1. Accounts Receivable: These are unpaid invoices that a business has issued to its customers for goods or services provided. In the factoring agreement, the business sells these accounts receivable to the factor. 2. Factor: The factor is a financial institution or a specialized factoring company that purchases the accounts receivable from the business. The factor provides the business with immediate cash in exchange for the future payment on the invoices. 3. Discount Rate: The discount rate determines the amount the factor will pay the business for the accounts receivable. It is calculated as a percentage of the total invoice value. The discount rate may vary depending on various factors such as the creditworthiness of the business's customers. 4. Recourse and Non-Recourse Factoring: In a recourse factoring agreement, the business retains the responsibility for any unpaid invoices or disputes that may arise from the accounts receivable sold to the factor. In contrast, non-recourse factoring absolves the business of any liability in case of non-payment by the customers. 5. Notification vs. Non-Notification Factoring: Notification factoring involves the factor directly notifying the business's customers about the assignment and directing the payments to be made directly to the factor. Non-notification factoring, on the other hand, allows the business to continue collecting the payments from their customers without notifying them of the factor's involvement. 6. Spot Factoring: Spot factoring allows the business to sell specific invoices selectively, rather than the entire accounts receivable portfolio. It provides flexibility by giving the business the opportunity to choose which invoices they want to factor. 7. Full-Service Factoring: Full-service factoring involves a comprehensive package where the factor assumes the responsibility for various functions such as credit checks, collections, and accounts receivable management. It lifts the administrative burden off the business by allowing them to focus on their core operations. These are some different types of factoring agreements that may be applicable in Missouri. It is essential for businesses considering factoring agreements to carefully review and understand the terms and conditions, as well as the specific requirements of the factor they are engaging with, in order to make informed decisions that align with their financial needs and goals.
