Factoring is a business financing alternative that offers key advantages for organizations seeking to obtain liquidity, save time and optimize invoice collection. When factoring, it is essential to draw up a contract that establishes a clear, secure and fair agreement for both parties.
Drafting a contract for this process can seem complicated and overwhelming. To ease this transition, it is necessary to know and understand the basics when drafting a factoring contract.
Characteristics of a factoring contract
The factoring contract is considered "atypical", which means that it is governed by the agreement established by the parties. It is a bilateral contract, therefore, both parties depend on each other and must be committed to the fulfillment of what has been agreed.
Types of services
Companies should consider the type of factoring service that their business needs and that is to be agreed upon. Is it recourse, non-recourse, spot or full factoring? Learn more about the types of factoring here.
Important clauses
It is important to establish key points in the contract, such as the subject matter, rights and obligations of the parties, fees, commissions, terms and other payment conditions.
Parties involved in the factoring contract
- Assignor: It is the customer or supplier company that has invoices receivable and requests the assignment to receive an advance of the value of such invoices.
- Factor: This is the entity that purchases the accounts receivable from the assignor, pays an advance percentage of the invoices and is responsible for collection management.
- Debtor: It is the assigning client who must pay the invoices that have been assigned to the factor. He must be notified that payment must be made directly to the factor.
Properly drafting a factoring contract is essential to achieve the results that both parties expect. This article addresses key aspects for managing a contract in a more secure and transparent way. With Suplos, you have the support of professionals to manage your factoring operations. Contact us now and learn more!
