What is a factoring arrangement?

Factoring Agreement is an agreement to purchase, according to which a person or entity, such as a corporation, obtains outstanding debts, invoices or receivables for a discount from another entity, usually from the company. In the textile industry, the Factoring Agreement is very common, although at the end of the 20th century, financial firms have also become interested in factoring agreement, sometimes at the expense of a consumer who often does not realize that his payable accounts can be sold by other companies with different payment policies. Factoring arrangements have been common in the United States since the revolution, but in recent years the merger and consolidation have dramatically changed the way the factoring arrangements have been addressed. The number of “factors” or companies that buy mass receivables have decreased, among other things, to a small number of megalithic corporations. Companies

generate lining accounts due to sale of goods or services to consumers or other credit companies and regularly decide to take into account their debt by concluding an agreement with other partiesAmi, where their outstanding receivables are cleaned, albeit with a discount, and another company is responsible for recovering the money. For many companies, the debt is capital and factoring arrangements is an excellent way to use this capital and put it in a usable form, especially in the large volume of the industry with a large number of creditors, such as textile trade.

Factoring arrangement may be gambling for factor, as invoices may be because there may be bad debts or other obstacles to collection of funds. As a result, the factors have begun to carry out credit inspections and assess the financial health of potential clients before entering a factoring arrangement, especially as a growing number of factors, is to handle retail trade, which in turn faces a large number of consumer debt, some of which may not be renewable. Clients provide annual reports and other financial health indicators Factoroh before their approval. Factors often determine the credit line with clients and dictate the amount of the loan that their clients can offer to customers.

Traditionally, there are two types of factoring measures. The first is called the "advance" arrangement in which the factor brings the payment after the client sent the goods to the customers. The second is the layout of the “maturity” or “collection” in which the factor is valid for invoices in pieces, either on the daily due date, or if the invoices are purchased by a factor. In some cases, customers are warned that invoices have been transferred to factor and instructions to make payments appropriately. However, this is not always and sometimes clients do not know their invoices are involved in a factoring arrangement.

The

face of factoring measures has changed since the 1970s, with a higher percentage of retail trade involved in factoring, a smaller number of total factors and much higher risks. With a change at the end of the 20th century came more awareness of consciousnessBitel and transparency concerning factoring measures and greater caution of part of the factors. The final result is billions of dollars in the capital of feeding the financial industry and ultimately the economy.