December 8, 2020 by eklose
Factoring provides a practical way for a company to have its accounts receivable credit insured and to receive financing for the operation of its business. Be sure to carefully review all of the provisions of the factoring agreement, first on your own, and then with experienced apparel counsel. The term factoring corresponds to French factoring. Factoring involves transferring a debt to a financial institution named factor. The objective may be to either acquire immediate liquidity without risk or to protect against late payments. If the purpose of the factoring is the cash advance, the factor pays the company between 70% and 80% of the amount of the debt. The factor collects the amount owed and pays the balance to the company which is reduced by its commission. If the purpose of factoring is the protection against late payments, the factor pays the amount owed to the business only on the due date, which is reduced by its commission. This facility should not be confused with the bank discount where the company is responsible for insolvency. Your apparel business is doing well and, instead of continuing to use your own financial resources or borrowing from family and friends, you are seeking third-party financing. You are now ready to start discussions with various financial institutions about factoring your company`s accounts receivable. A company and a factor enter into an agreement in which the factor purchases a company`s accounts receivable (such purchased accounts are called factored accounts), collects on the factored accounts, then countries the company the purchase price of the accounts. In addition, if the factor approves an order from a creditworthy customer of the company, and the customer thereafter fails to pay the factor accounted solely as the result of the customer`s financial inability to pay (i.e., due to insolvency or bankruptcy) and not as the result of any type of dispute or other reason, the factor will die pure pricease of the account to the company.
Definition of factoring The term factoring is the equivalent of the term French factoring. Factoring involves transferring a debt to a financial institution named factor. The goal may be to buy money… With a factoring contract backed by credit insurance, the toymaker calls on Coface Poland Factoring to manage this peak activity period and cover its financing needs. Ultimately, credit insurance improves both the level of security of your trade receivables portfolio and the terms of your factoring contract.