Permission To Deposit

When entering into a factoring arrangement to have invoices financed the actual contract is called the Purchase and Sale Agreement. The contract allows that the seller of invoices pledges the obligation of the account debtor to pay the factoring company, the purchaser. Upon processing, the account receivable is ready for funding. When the customer is ready to pay the bill they may create the actual check made out to the seller’s name, as long as it is physically sent directly to the factor’s lockbox. Because there is a power of attorney clause in the contract, the factoring company’s bank will deposit checks payable to the order of their clients. This sometimes makes it easier on customers who find it difficult to change the name on the outgoing payment.