Invoice factoring is a transparent commercial finance transaction between three parties. The factoring company, their client and the account debtor, whereby the client is selling the proceeds of their invoice to the account debtor, to the factor. The client has completed the work and has invoiced their customer, who now becomes the account debtor. The customer owes the client for the work performed. The client is using the invoice as collateral for the advance given by the factoring company.

All this is to say that the customer or account debtor must be notified of the transaction. They are legally part of the three party transaction, even if it is only to send in their check. But by notifying the account debtor they are obligated to pay the factoring company directly which is a critical part of the factoring transaction.

This entry was posted on Tuesday, October 7th, 2008 at 9:49 am and is filed under Debt Financing Awareness, Factoring Information, Factoring Process. You can follow responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.