Advance and Discount Factoring: Legal Distinctions and Structural Insights

Read this practice note discussing factoring transactions, the parties involved, and the reasons for factoring. This practice note specifically discusses the distinguishing features of advance and discount factoring agreements and details the typical structure and terms of these types of factoring arrangements, including the mechanics, flow of funds, advance rates, security, and recourse of the factor.

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Related Content

• Factoring Transactions
  Review this practice note discussing factoring, a type of financing transaction where accounts receivable (sometimes referred to as accounts or receivables) are sold by the company that originates the accounts (the originator) to a third party for cash.

• Advance Factoring Agreement
  Use this agreement where the originating company sells its accounts receivable to a factor before collection of the receivables from the account debtor. The terms of factoring agreements vary as to when the sale is effective, which accounts receivable are sold, whether the factor has recourse to the seller for nonpaying accounts receivable, whether account debtors know about the factoring arrangement, as well as other terms.

• Factoring Transactions Video
  Watch this video providing an overview of factoring transactions.

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