Factoring Agreement

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Factoring Agreement
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Factoring Agreement

Factoring Agreement

A financial contract where a business sells its accounts receivable to a third party at a discount for immediate cash.

45.59

(3 customer reviews)

Description

A Factoring Agreement helps businesses improve cash flow by selling outstanding invoices (accounts receivable) to a factoring company at a discount. The factor advances a percentage of the invoice value, collects payments from customers, and remits the remaining balance minus a fee. The contract defines advance rates, fees, recourse options (if customers fail to pay), and collection responsibilities. Factoring is commonly used in industries with long payment cycles, such as manufacturing and logistics. While it provides immediate liquidity, businesses must weigh costs against benefits.