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.
An Oklahoma Factoring Agreement refers to a contractual arrangement between a business and a financial institution known as a factor, which allows the business to sell its accounts receivable (invoices) to the factor at a discounted price. This enables the business to receive immediate cash flow by eliminating the need to wait for customer payments. Factoring agreements are a vital financial tool for businesses that face cash flow challenges due to slow-paying customers or long payment terms. By selling their invoices to a factor, businesses can access a significant portion of the invoice value upfront, typically around 70-90%, while the factor collects payment from the customers directly. Once the factor receives full payment from the customer, they provide the remaining balance to the business, deducting a pre-agreed fee for their services. There are different types of Factoring Agreements available in Oklahoma, catering to the specific needs of various businesses: 1. Recourse Factoring: In this type of agreement, the business remains responsible for any unpaid invoices that the factor is unable to collect. If the customer fails to pay within a specified period, the factor can demand the business to repurchase the invoice or replace it with a new one. 2. Non-Recourse Factoring: Unlike recourse factoring, the factor bears the risk associated with customer non-payment. In this arrangement, the factor cannot seek reimbursement from the business if the customer defaults on the invoice payment. However, non-recourse factoring usually involves higher fees for the added risk assumed by the factor. 3. Invoice Factoring: This is the most common type of factoring agreement. It allows businesses to sell their outstanding invoices to the factor, providing immediate working capital for various business expenses, such as meeting payroll, purchasing inventory, or investing in growth initiatives. 4. Spot Factoring: Also known as single invoice factoring, spot factoring allows businesses to select individual invoices to factor without any long-term commitment. This provides businesses with the flexibility to access immediate cash flow while retaining control over their ongoing invoice management. In summary, an Oklahoma Factoring Agreement is a financial arrangement that enables businesses in Oklahoma to convert their slow-paying invoices into immediate cash flow. With various types of factoring agreements available, businesses can choose the one that best suits their needs and preferences.
