According to Investapedia:
A factor is a financial intermediary that purchases receivables from a company. A factor is essentially a funding source that agrees to pay the company the value of the invoice less a discount for commission and fees. The factor advances most of the invoiced amount to the company immediately and the balance upon receipt of funds from the invoiced party.
Accounts receivable financing is a type of asset-financing arrangement in which a company uses its receivables — outstanding invoices or money owed by customers — as collateral in a financing agreement. In this agreement, an accounts receivables financing company, also called a factoring company, gives the original company an amount equal to a reduced value of the unpaid invoices or receivables.
This type of financing helps companies free up capital that is stuck in unpaid debts. Accounts receivable financing also transfers the default risk associated with the accounts receivables to the financing company.
Factoring: Understanding the Flow of Money
Factoring is a form of transactional funding, that advances the rate of funds owed out of net days until payment terms are due. Factoring comes in many more forms of transactional financing….Like financing Paper or mortgages, just on shorter terms……typically 30-90 day net terms…….Allowing small gains on short term holdings such as 3% return on say 100k owed in 15 days. Quick in and outs.
The factoring is discounting the Net owed at say 3% recourse, Net 30, D&B on Customer, and Good payment holder. Factor Discounts Receivables, at 3% per Invoice, customer due in under 30 days. All Copies and Bills attached with signatures and dates. The flow of money is the need, to cover immediate liquidity, since receiver cannot hold risk, due to this operational need. The factor gives receiver- 97% of the funds for the term of net 30 of invoice. 3% gives the factor ability to receive the funds guaranteed by the confidence in Payor and Payee History of Pay in Past; recourse on the receiver if the Payor does not pay as promised to the Factor for his capital repayment at the Strike Value Declared and Signed.
Damn that was a mouth full…..I had to reread that one twice…… and I wrote it……
Anyone can factor. For Instance, Delivery of a Pc200, or a Carrier Accounts Receivable from xyz broker 2short.
I use Recourse funding, 3%—- anyone that comes to me to use my funding agree to a minimum fee of 2% to me, of the Net, plus I get a 2% over the non-recourse risk that I with the funding source agree to take as acceptable. low risk…Learn to profit, because your use of capital can be used to fund additional revenues.
Self-Directed IRA’s are wonderful investment vehicles for those who would like to learn to invest in factoring education that is available from long time industry veterans.
A factor is essentially a funding source that agrees to pay the company the value of the invoice less a discount for commission and fees. The factor advances most of the invoiced amount to the company immediately and the balance upon receipt of funds from the invoiced party.
The Factor is trading the “Security”.
A security is a fungible, negotiable financial instrument that represents some type of financial value, usually in the form of a stock, bond, or option.
—–Even Cash Owed…….
Wal-Mart over the Years have paid Net 120 and 160, and I do recall a net 90………They did that because they knew that Mr Walton; secured his debts as promised usually before the term, never after. Mr Walton was known for his payments. They secured best funding as a guarantee to their promise over next 160 days out. Lower Rates, and giving his additional terms out because it was more profitable to let him turn the money than tying up the funds unsecured…..terms can always be changed, that is just an amendment to the Security Agreement………
Once your interest are sold, the new owner has your interest to collect full amount off Agreement, or Strike Price. Against either You, them, or you and them………………The Financial (Monetary/ transactional)Factor is the Institutional version of this investment vehicle holder. Funds hold these to turn their money at a 3% rate monthly—Instead of hold cash…….or Savings……………They want it earning……..3% Turnover under 30 days is pretty decent returns when you figure they fund a lot of capital to earn a profit…….$100MM at 3% is still $3Mil to the Good every average of 26 day to pay——-and they give you the net days free to reinvest that capital……….even if you did just $1.5MM- that is still earning–$57,692 per day…………Investment firms understand that they would rather earn on the flow than have the money sit idle waiting on the next investment, deemed approved.
But Hey I don’t know what the fuck I am talking about…………I am just an ol’ farm boy that’s thrown more hay than most will ever see in their life……………
I wanna be deep in the money!!!!!!
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