Factoring Agreement

It is said that factoring has its origin in ancient Mesopotamian culture, with the rules of factoring being maintained in the Code of Hammurabi. [22] As you may know, billing approval is not based on your credit, but on the creditworthiness of your customers. For the postman to have worked with you, it will check the creditworthiness of your customers. So part of the factoring agreement is that you agree to the factoring company performing credit checks on your customers. In essence, the entity that sells the receivables transfers the risk of default (or non-payment) of its customers to the factor. As a result, the postman must collect a fee to offset this risk. The length of time the waiting or non-collection of debts may also affect the charge on the factors. The factoring agreement may vary between financial institutions.