New Mexico Accounts Receivable — Contract to Sale refers to a financial transaction commonly used by businesses in New Mexico to convert outstanding accounts receivable into immediate cash. This process involves selling the rights to the future payment of invoices or customer accounts to a financial institution or specialized factoring company. The company selling the accounts receivable is referred to as the "seller," and the entity buying them is called the "buyer." The primary purpose of a contract to sale for accounts receivable in New Mexico is to enhance cash flow and address the working capital needs of businesses. By selling their accounts receivable, companies can avoid the potential risks associated with delayed payments or bad debts and immediately receive a percentage (usually around 80-90%) of the total outstanding amount. The remaining balance, minus a service fee or discount rate, is paid to the seller once the buyer collects the full payment from the customers. New Mexico offers various forms of accounts receivable — contract to sale, each tailored to different business structures and requirements. Some common types include: 1. Recourse Contract to Sale: In this type of agreement, the seller retains liability for the purchased accounts receivable in case the customer defaults or fails to pay the buyer. The seller is responsible for repurchasing any uncollectible invoices or compensating for the unpaid amount. 2. Non-Recourse Contract to Sale: This arrangement transfers the risk of non-payment to the buyer. In case of customer default, the buyer absorbs the loss and cannot seek reimbursement from the seller. Non-recourse contracts generally come with higher service fees due to the increased risk borne by the buyer. 3. Full Notification Contract to Sale: With this type of contract, the customer is notified of the transfer of their accounts receivable to the buyer. The customer is now directed to make payments directly to the buyer, eliminating the seller's involvement. This arrangement provides transparency and reduces confusion for the customer. 4. Limited Notification Contract to Sale: In this case, the seller retains control over collecting payments from the customer. The customer may not be notified of the sale, and the seller continues to manage the relationship while periodically remitting payments to the buyer to fulfill the terms of the contract. Businesses in New Mexico can choose the most suitable type of accounts receivable — contract to sale based on their unique circumstances, risk tolerance, and preference for involvement in the collection process. It is essential to carefully assess the terms, fees, and conditions of any contract before entering into an agreement to ensure a mutually beneficial and reliable arrangement.