Factoring Agents

The agents participation in these transactions are as follows:

Client: A provider of goods or services, for which a credit invoice or approved invoice has been issued, or which has received deferred payment checks, promissory notes or credit instruments, with collection terms ranging between fifteen and one hundred and eighty days. These are the receivables that can be assigned with or without recourse to a specialized entity or factoring company, which will advance the funds and be responsible for collecting them when they fall due.

Debtor: A company that has received the goods or services and is obliged to pay the factoring company the receivables when they fall due.

Factor: The specialized company that has advanced funds to the client, and which will receive their face value from the debtor on the due date for the receivables.

The Client and the Factor

For a client to enter into a relationship with a factor an agreement must be entered into first between the client and the debtor whose debt has been ceded, whereby the former indicates the will to sell and deliver the goods or services, and the account debtor assigned accepts to receive the item in the terms established.

This link can be independent of the existence of a factor, such as when the client finances the payment terms and conditions agreed between the parts out of its own resources or those of third parties not directly connected to the transaction about to be carried out.

If a factor is involved in the period prior to the closing of the business deal, in anticipation of a factoring contract with the client ( the assignor), the factor can collaborate with the client in analyzing the credit risk of the account debtor, become informed as to the nature of the transaction and set a limit on the risk to be assumed, in harmony with the needs of the client.

In such a case, the formal relationship between the client and the factor is initiated with the signing of a factoring contract, which may be global, individual or specific.
A global contract is one under which the client grants the factor complete responsibility for the administration of its accounts receivable. Individual contracts concern a given number of assigned debtors, while a specific contract covers one specific transaction.

Factor and Account Debtor

Before signing the contract, the factor must be familiar with the third party involved in this business, the account debtor, and it is the evaluation of the account debtor by the factor that will lead to the inclusion of fundamental contract clauses.

The analysis that the factor must carry out depends on the type of contract to be signed and whether financing will be involved.
The credit and commercial evaluation of the two parties will result in the contractual terms that the factor will offer the client.