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Business
Factoring for Trade
In
corporate finance, factoring is the business of a company
(factor) that buys a manufacturer's invoices at a discount
and takes responsibility for collecting the payments due on
them. This process brings cash to the manufacturer due from
the customer, sooner than the terms that the invoice would
normally allow. Typically, most invoices are factored at fee
anywhere from 1.67% for each 10 days in the terms (5% for
every 30 days) to 8% or even 10% of the principle amount,
depending on the relative credit worthiness of the customer
who is the payor on the original invoice. Most factoring businesses
will limit their transaction amount to no more than $100,000
but with generally no set minimum transaction amount.
There are usually four parties involved when an invoice is
factored:
* Seller of the product or service who originates the invoice.
* Payor and recipient of the invoice (and associated product
and/or service) who promises to pay the balance due within
a set terms (typically anywhere from 10 to 30 days).
* Broker who is approached by the Seller to wishes to receive
funds ahead of the Payor terms.
* Funder who supplies the actual hard cash to complete the
transaction. Quite often, the Broker and Funder are the same
entity. However Brokers will also work with separate Funder
taking a commission.Typically, the Funder as the chief risk
taker in this transaction receiving the Lion's share of the
fee. A Broker will then typically receive as payment typically
10% of the funding fee.
Retrieved from "http://en.wikipedia.org/wiki/Factoring_%28trade%29"
busness
fctoring, bsuiness factorng, busines factornig, busienss fcatoring,
afctoring
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This article is licensed under the GNU
Free Documentation License.
It uses material from the Wikipedia
article "Factoring Trade".
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