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Assignment of Accounts Receivable – Trap for the Unwary

By  Steven A. Jacobson

Most businesses are familiar with the mechanics of an assignment of accounts receivable. A party seeking capital assigns its accounts receivable to a financing or factoring company that advances that party a stipulated percentage of the face amount of the receivables.

The factoring company, in turn, sends a notice of assignment of accounts receivable to the party obligated to pay the factoring company’s assignee, i.e. the account debtor. While fairly straightforward, this three-party arrangement has one potential trap for account debtors.

Most account debtors know that once they receive a notice of assignment of accounts receivable, they are obligated to commence payments to the factoring company. Continued payments to the assignee do not relieve the account debtor from its obligation to pay the factoring company.

It is not uncommon for a notice of assignment of accounts receivable to contain seemingly innocuous and boilerplate language along the following lines:

Please make the proper notations on your ledger and acknowledge this letter and that invoices are not subject to any claims or defenses you may have against the assignee.

Typically, the notice of assignment of accounts receivable is directed to an accounting department and is signed, acknowledged and returned to the factoring company without consideration of the waiver of defenses languages.

Even though a party may have a valid defense to payment to its assignee, it still must pay the face amount of the receivable to the factoring company if it has signed a waiver. In many cases, this will result in a party paying twice – once to the factoring company and once to have, for example, shoddy workmanship repaired or defective goods replaced. Despite the harsh result caused by an oftentimes inadvertent waiver agreement, the Uniform Commercial Code validates these provisions with limited exceptions. Accordingly, some procedures should be put in place to require a review of any notice of assignment of accounts receivable to make sure that an account debtor preserves its rights and defenses.

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What does "paid on account" in accounting mean, what is a financing receivable.

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You can raise cash fast by assigning your business accounts receivables or factoring your receivables. Assigning and factoring accounts receivables are popular because they provide off-balance sheet financing. The transaction normally does not appear in your financial statements and your customers may never know their accounts were assigned or factored. However, the differences between assigning and factoring receivables can impact your future cash flows and profits.

How Receivables Assignment Works

Assigning your accounts receivables means that you use them as collateral for a secured loan. The financial institution, such as a bank or loan company, analyzes the accounts receivable aging report. For each invoice that qualifies, you will likely receive 70 to 90 percent of the outstanding balance in cash, according to All Business . Depending on the lender, you may have to assign all your receivables or specific receivables to secure the loan. Once you have repaid the loan, you can use the accounts as collateral for a new loan.

Assignment Strengths and Weaknesses

Using your receivables as collateral lets you retain ownership of the accounts as long as you make your payments on time, says Accounting Coach. Since the lender deals directly with you, your customers never know that you have borrowed against their outstanding accounts. However, lenders charge high fees and interest on an assignment of accounts receivable loan. A loan made with recourse means that you still are responsible for repaying the loan if your customer defaults on their payments. You will lose ownership of your accounts if you do not repay the loan per the agreement terms.

How Factoring Receivables Works

When you factor your accounts receivable, you sell them to a financial institution or a company that specializes in purchasing accounts receivables. The factor analyzes your accounts receivable aging report to see which accounts meet their purchase criteria. Some factors will not purchase receivables that are delinquent 45 days or longer. Factors pay anywhere from 65 percent to 90 percent of an invoice’s value. Once you factor an account, the factor takes ownership of the invoices.

Factoring Strengths and Weaknesses

Factoring your accounts receivables gives you instant cash and puts the burden of collecting payment from slow or non-paying customers on the factor. If you sell the accounts without recourse, the factor cannot look to you for payment should your former customers default on the payments. On the other hand, factoring your receivables could result in your losing customers if they assume you sold their accounts because of financial problems. In addition, factoring receivables is expensive. Factors charge high fees and may retain recourse rights while paying you a fraction of your receivables' full value.

  • All Business: The Difference Between Factoring and Accounts Receivable Financing

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Assignment of Accounts Receivable Journal Entries

The assignment of accounts receivable journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of accounts receivable assignment.

The assignment of accounts receivable journal entries are based on the following information:

  • Accounts receivable 50,000 on 45 days terms
  • Assignment fee of 1% (500)
  • Initial advance of 80% (40,000)
  • Cash received from customers 6,000
  • Interest on advances at 9%, outstanding on average for 40 days (40,000 x 9% x 40 / 365 = 395)

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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Financial Statements pp 53–67 Cite as

Account Receivables

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Receivable is a general term which refers to all monetary obligations owed to the business by its customers or debtors. As long as a business expects to recover the money from the debtors, it records its receivables as assets in its balance sheet because it expects to derive future benefits from them. It does not matter whether they are due in the current period or not.

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§ 8:1. Factoring agreement—Assignment of accounts receivable without recourse—General form | Secondary Sources | Westlaw

assignment of accounts receivable without recourse

§ 8:1. Factoring agreement—Assignment of accounts receivable without recourse—General form

23a west-lf § 8:1 james h. walzer west's legal forms  (approx. 7 pages).

assignment of accounts receivable without recourse

Factoring Without Recourse – Accounting Analysis

Factoring is a contract where a company transfers or sells its accounts receivable balance (the debtors balance) to a factor, usually a specialised factoring provider. This factoring can be with or without recourse to the factor.

The topic is of particular importance in the accounting treatment of the transaction and whether the company should keep reporting the accounting receivables or whether the company should remove them from the balance sheet. Accounting standards (IFRS and GAAP) distinguish two cases, factoring with recourse and factoring without recourse.

Advantages of Factoring

  • A short term quick solution that can bring cash and help the company meet its short term obligations.
  • The fees are usually based on the credit worthiness of the company’s accounts receivable (the company’s clients) and not on the credit worthiness of the company itself.
  • The transaction is not secured with any of the company’s assets.
  • The company does not increase its debt, putting at risk any bank covenants or other lending agreements.

Disadvantages of Factoring

  • Is it only a short term solution that should be used when the company faces liquidity problems.
  • The fees including any interest payment can be substantial.
  • It can be perceived by creditors and investors as a signal of debt and liquidity problems.

There are two different factoring transactions, factoring with recourse and factoring without recourse.

Factoring Without Recourse

Factoring without recourse or non-recourse factoring is the transaction where the rights and the obligations (including the risk of the receivables turning out to be a bad debt) are transferred to the factor.

The difference between the value of the receivables and the amount received is an expense, and we disclose it on the income statement. The non-recourse factoring has increased fees that reflect the transfer of the risk to the factor.

Factoring With Recourse

Factoring with recourse has lower fees since the company does not sell the accounts receivable. The risk of the debtor’s balance turning out to be not receivable remains with the company, rather than transferring to the factor.

Difference Between a Loan and Factoring

There are several differences between a loan that a company can take from a bank and a factoring transaction. First, the factor will assess the creditworthiness and the recoverability of the accounts receivable. However, for a loan, the bank sets an interest rate that reflects the company’s creditworthiness based on several factors, which include the total assets, the debt to equity ratio, the profitability etc.

In addition, when a company takes a loan, the bank will provide the funding, providing that a fixed or floating charge collateral is in place. Only if the loan becomes non-recoverable does the bank enforce the charge. However, under a factoring transaction, the asset is sold and not secured.

Without Recourse Example

Company A factors $1,000,000 of its accounts receivable to Factors Inc. without recourse. The factor applies a 5% interest fee and retains 20% of the receivables, which will be paid when all receivables are collected.

Company A will therefore receive in total $1,000,000* (1-0.05)=$950,000. The company will record $50,000 as an expense on its income statement. The amount that company A will receive immediately is 75% * 1,000,000=$750,000.

The remaining $200,000 will be recorded as a receivable which will be collected when the factor collects the receivables that have been factored in.

With Recourse Example

We will use the same example as above, but $20,000 is the estimated recourse obligation forecast based on the recoverability of the similar debtors’ balances.

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  • Receivables
  • Notes Receivable
  • Credit Terms
  • Cash Discount on Sales
  • Accounting for Bad Debts
  • Bad Debts Direct Write-off Method
  • Bad Debts Allowance Method
  • Bad Debts as % of Sales
  • Bad Debts as % of Receivables
  • Recovery of Bad Debts
  • Accounts Receivable Aging
  • Assignment of Accounts Receivable
  • Factoring of Accounts Receivable

Factoring of accounts receivable is the practice of transferring the ownership of accounts receivable to a company specialized in receivable collection, in exchange for immediate cash. In other words, the company that originally owns the receivables, sells them to another company called “factor” and receives immediate cash.

Factoring helps a business improve its cash flow by converting its receivables immediately into cash instead of waiting for the due dates of payments by customers. A drawback of factoring is that it is done at a discount, which means that the cash received on factoring of receivables is less than the value of the receivables transferred. This is because the factor expects a certain margin and it faces risks such as time value of money , and depending on the agreement, the risk of default by the debtors.

The parties to the factoring agreement assess the recoverability of the accounts receivable, decide whether or not the factoring agreement will be with recourse or without recourse, and then agree on a suitable discount factor to calculate the amount of fee to be charged by the factor i.e. the discount. After deducting such a fee from the value of the accounts receivable, the factor pays in cash to the originating company. The factor may also withhold an additional amount as a refundable security against any bad debts that may arise.

As a result of the above transaction, the factor gains ownership of the accounts receivable and has access to the detailed records of those receivables . The factor is specialized in receivable collection and it may actually be cost effective for businesses to factor their receivables because doing so will save costs such as wages paid to staff for following up with customers.

The factor collects cash from the debtors as the due dates approach. The procedure to be followed in a situation where a debt becomes irrecoverable, depends on whether or not the factoring agreement is with recourse.

Recourse vs non-recourse factoring

Under non-recourse factoring, the factor may set-off the sum retained as a security, if any, against any bad debts that may arise but the factor is not entitled to be reimbursed by the originating company if the total of bad debts exceed the amount of security. In other words, the additional loss on bad debts under non-recourse factoring is borne by the factor.

Under a factoring agreement with recourse, the company factoring its receivables agrees to pay bad debts in full to the factor. So if the security falls short of the total bad debts, the factor is entitled to be reimbursed for bad debts in full.

Non-recourse factoring is riskier than factoring with recourse for the factor, generally resulting in higher discount rates over factoring with recourse.

Factoring vs assignment of receivables

Factoring is different from a financing agreement involving assignment of receivables because the later uses receivables as a collateral security for a loan, but the actual ownership of the receivables and the right to collect them is not transferred as long as the loan and any related interest payments are paid in time.

The following example illustrates the journal entries to record transactions related to factoring with and without recourse:

On January 1, 20X5, Impatient Inc. factored its accounts receivable of $100,000 at a fee of 8%. Under the terms of the agreement, the company received $82,000 in cash and the rest of the amount was retained by the factor as a security for any bad debts that may arise. Any excess of this security sum over the total bad debts was agreed to be returned by the factor at the end of the accounting period i.e. December 31, 20X5.

On December 31, 20X5 the full amount of security sum was withheld by the factor because the actual bad debts totaled $11,000 exceeding the security sum.

Impatient Inc. had already provided allowance for doubtful debts in the factored accounts receivable and a bad debts expense was recognized in the income statement of year ended December 31, 20X4.

Required: Pass journal entries to record the above transactions for Impatient Inc. both under factoring with recourse and factoring without recourse.

January 1, 20X5: Here, the journal entry will be identical under both factoring with recourse and factoring without recourse.

December 31, 20X5: The journal entries will differ under the two types of factoring. Since the actual bad debts exceed the amount initially retained by the factor, Impatient Inc must pay the factor, an additional amount of $1,000 under factoring with recourse but there is no such remedy if the factoring is without recourse.

Under factoring with recourse:

Under factoring without recourse:

It is important to note that the type of factoring influences the amount of fee charged and the amount of security held by the factor and the scenario in this example is only for the purpose of comparing the two types. The amount of security retained may be zero under factoring with recourse because the agreement guarantees the factor that any debts that may turn out to be irrecoverable will be reimbursed.

by Irfanullah Jan, ACCA and last modified on Oct 29, 2020

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Using Receivables to Generate Cash

assignment of accounts receivable without recourse

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on March 23, 2023

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Table of Contents

Often in real life, a company's management will decide that it would rather have cash immediately than wait for receivables to be collected.

There are two broad approaches to generating cash from receivables. In one, the receivables are pledged as collateral for a loan.

In the other, the receivables are assigned to another party (a factor ), much in the same sense that other assets are sold.

However, there are characteristics of these assignments that prevent some of them from being exactly like a sale. The illustration below summarizes the four possible methods:

  • Assignment with recourse (assignor collects)
  • Assignment with recourse (factor collects)
  • Assignment without recourse

Using Receivables to Generate Cash

The use of non-uniform terms in practice makes it even more difficult to understand these practices. The meaning of pledging is generally unambiguous and, therefore, there is no problem.

However, many persons refer to the act of assigning as factoring. Some have even used assignment to refer to situations in which accounts are assigned with recourse while using factoring to refer to situations where there is no recourse.

We have chosen the approach in this category for its descriptiveness, simplicity, and similarity to legal usage.

We encourage the reader to understand the concept of each approach. Then, when these situations are encountered in practice, they will be accounted for according to their nature rather than the terminology used.

This example demonstrates disclosures when receivables are used to generate cash. Consider the following information about the Rath Packing Company's current assets:

Rath Packing Company Current Assets

NOTE 5: Financing Agreement

All receivables and inventories have been pledged as collateral for borrowings under a financing agreement.

The lender is a commercial finance company; however, two banks participated in the borrowings up to a maximum amount of $4,000,000 until 3 September 2018.

One of the banks has continued to participate up to a maximum amount of $2,000,000 since that date.

The total amount available for borrowing under the agreement varies as determined by the commercial finance company. It amounted to $10,000,000 on 27 September 2018.

Using Receivables to Generate Cash FAQs

What are accounts receivable.

Accounts Receivable (A/R) refers to the outstanding invoices a company has issued to its customers for products or services sold, but which have not yet been paid. This represents the money that a company is owed by its customers for goods or services that have been delivered but not yet paid for.

What are the methods used to generate cash from receivables?

There are four basic methods: (1) pledge accounts receivable as collateral for a loan; (2) assign accounts receivable with recourse, also known as factoring; (3) assign accounts receivable without recourse, and (4) use accounts receivable as collateral for a standby letter of credit.

What are the benefits of using receivables to generate cash?

There are several benefits to using receivables to generate cash. First, it can help improve a company's cash flow situation by increasing the amount of money coming in. Second, it can help a company better manage its working capital, as it can use the cash generated from receivables to pay down other debts or invest in new inventory. Finally, using receivables to generate cash can help a company build stronger relationships with its customers, as they will see that the company is willing to work with them to get paid.

What are the risks associated with using receivables to generate cash?

There are a number of risks associated with using receivables to generate cash. The most obvious risk is that a company may not be able to collect all of the money it is owed. This could significantly reduce or even eliminate the benefits of using receivables to generate cash. Additionally, a company that relies too much on receivables to generate cash may end up taking on too much risk, which could lead to financial problems down the road.

How can I maximize the benefits and minimize the risks of using receivables to generate cash?

There are a few things a company can do to maximize the benefits and minimize the risks of using receivables to generate cash. First, it is important to have a solid understanding of one's customers and their payment habits. This will help a company better assess which receivables are most likely to be paid on time and which ones are more likely to go unpaid. Second, a company should have strong internal controls in place to ensure that all receivables are properly managed and collected. Finally, a company should consider using a third-party service to help manage its receivables and collection efforts. This can take some of the burdens off of the company and help improve its chances of successful collections.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website , view his author profile on Amazon , or check out his speaker profile on the CFA Institute website .

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Factoring Receivables Journal Entry

In business, the company may need to sell its receivables which is called factoring receivables if it needs early cash for its business operation and cannot wait to collect all receivables. In this case, the company needs to make the factoring receivables journal entry whether the factoring receivables is with recourse or without recourse.

Factoring receivables with recourse and without recourse may be a bit different from each other. This is due to the factoring receivables with recourse will generate the contingent liability to the company that sells receivables. And if such contingent liability is material and is likely to occur, the company not only needs to disclose it in the notes on financial statements but also needs to make provision for it by recognizing the loss immediately.

Factoring receivables journal entry

The company can make the factoring receivables journal entry by debiting the cash account and loss on sale of receivables account and crediting the accounts receivable.

Loss on sale of receivables is an expense that the factoring company (the factor) charges on transferring of receivables. This journal entry is straightforward as there is no withholding amount kept with the factoring company.

However, the factor usually withholds some amount (e.g. 20% of receivables) as a security against any bad debt that may arise. In this case, the journal entry will need to include this security sum in the due from factor account as below:

The due from factor in this journal entry is the amount that the factor withholds in order to cover the risk of bad debts that may occur. Likewise, the factor will pay this withheld amount to the company when those amounts in invoices are collected.

Factoring receivables example

For example, the company ABC sells its receivables of $100,000 to a factoring company in order to receive early cash for its business operation. The company receives total cash of $80,000 from the sale transaction while the amount of $15,000 is retained by the factor as security against bad debts and at the same time, the factor charges a 5% fee on receivables which is $5,000.

In this case, the company ABC can make the factoring receivables journal entry for selling of $100,000 receivables as below:

Factoring receivables with recourse vs non-recourse

Factoring receivables with recourse.

Factoring receivables with recourse means that the company selling receivables is liable to the factor if receivables cannot be collected. In other words, the company selling receivables still bears the risk of nonpayment from customers and the factor can demand the money back if the receivables cannot be collected.

Likewise, the factoring receivables with recourse will result in contingent liability on the company. The company is usually required to disclose this contingent liability in the notes to financial statements.

And if the amount of the contingent liability is material and it is likely to happen (e.g. based on past experiences), the company needs to make provision for it. Likewise, if this happens, the company needs to make the journal entry for factoring receivables with recourse as below:

The recourse liability is an estimated amount (e.g. based on past experiences) that the company expects receivables to be non-collectible.

For example, assuming the factoring receivables of $100,000 in the example above is with recourse. And based on past experiences, the company ABC estimates the fair value of the recourse liability to be $8,000.

If that is the case, the company ABC can make the journal entry for factoring receivables with recourse with the $8,000 recourse liability as below:

The $13,000 of loss on sale of receivables comes from the fee charges of $5,000 plus the estimated loss due to uncollectible receivables (recourse liability) of $8,000.

Factoring receivables without recourse

Factoring receivables without recourse means that the company selling receivables will not bear the risk of nonpayment from customers. The risks are transferred to the factoring company at the time of sale of receivables. In other words, the company selling receivables will no longer liable for uncollectible receivables after they are transferred to the factor.

Likewise, there is no contingent liability in the factoring receivables without recourse. Hence, the journal entry for factoring receivables without recourse is the same as in the first example.

It is useful to note that as the factor bears a much higher risk on the factoring receivables without recourse, so the fee it charges to the company is also much higher. Hence, in practice, the two examples above would come with different fee charges if one is factoring receivables with recourse while another is without recourse.

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Assignment of Accounts Receivable Non-Recourse

Published by TemplateGuru Admin on January 1, 2018

About this template:

This particular legal document or agreement of assignment is used to assist in articulating the terms of a receivable account where there is no recourse. Download more useful legal document templates from https://www.templateguru.co.za/templates/legal/

ASSIGNMENT OF ACCOUNTS RECEIVABLE-Non Recourse FOR VALUE RECEIVED the undersigned [YOUR COMPANY NAME] hereby sells and transfers all right title and interest in and to the account(s) receivable as annexed to [NAME]. The undersigned warrants that the said account(s) are just and due and the undersigned has not received payment for same or any part thereof; provided however that said account(s) are sold without recourse to the undersigned in the event of non-payment.

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Non-Notification Loan: What It is, How It Works, History

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

assignment of accounts receivable without recourse

Investopedia / Jiaqi Zhou

What Is a Non-Notification Loan?

The term non-notification loan refers to a full-recourse loan that is securitized by a company's accounts receivable (AR). Put simply, it is a financing method in which a business sells its AR portfolio to another party. Non-notification loans are a type of invoice factoring, which is a common way for business-to-business (B2B) corporations to obtain financing. Outstanding invoices are sold to a factoring company for a percentage of their value, which gives the borrowing business a source of cash to maintain an efficient cash flow.

Key Takeaways

  • A non-notification loan refers to a full-recourse loan that is securitized by a company's accounts receivable.
  • Outstanding invoices are sold to a factoring company for a percentage of their value.
  • Factoring gives the borrowing business immediate access to cash to maintain an efficient cash flow.
  • This type of financing is common in business-to-business corporate settings.
  • Factors also receive a fee based on the risk of default related to invoice repayment by the seller's customers.

How Non-Notification Loans Work

Factoring is a method used by companies to immediately obtain capital and financing to satisfy their short-term needs without the need to go to a traditional lender, such as a bank or financial institution. The amount they receive is completely based on the value of a company's accounts receivables, which represent the total amount of money owed to a company by its customers.

Non-notification loans are a form of factoring. They are also commonly referred to as accounts receivable financing. These types of loans generally involve three different parties. These entities include:

  • the borrowing company
  • the company that purchases the portfolio (known as the factor)
  • the original company's customers

The borrowing company is given cash by the lender. Unlike other forms of factoring, the borrowing company retains the relationship with its customers. This means it continues to collect from its debtors. The factor, in turn, receives a portion of the money paid by the borrower's customers. The lender also receives a fee to compensate them for any default risk that arises when customers don't pay their invoices. The amount of the fee depends on the degree of default—the greater the risk of default, the larger the fee. A lower chance of default results in a lower fee paid to the factor.

Non-notification loans are most common in B2B settings because factoring companies only give loans on invoices issued to corporate clients. Most factoring companies require that borrowers demonstrate minimum annual revenues , sign an annual contract, and make monthly minimum payments .

Commercial banks and finance companies may find non-notification loans attractive because they don't assume credit risk on the receivables sold or assigned.

Special Considerations

Commercial banks and finance companies are the primary originators of non-notification loans. But the internet allows modern factoring companies to offer a broader range of non-notification loans to more businesses, with lower revenue requirements and less stringent restrictions. Non-notification loans have also been adapted to specific industries, including construction, real estate , the medical industry, and trucking.

History of Non-Notification Loans

English common law traditionally held that non-notification loans were invalid. This remained true in the United States until the mid-20th century. By then, factoring became a prevalent form of financing for the textile industry, a rapidly growing business whose financing needs may have stressed smaller banks in the U.S. banking system. By 1949, most U.S. states legalized non-notification loans.

Banks and other finance companies began providing the service to commercial clients in the early 20th century because the Federal Reserve would not buy notes backed by AR. Non-notification loans can be attractive for a financing company because they do not assume any credit risk on the receivables sold or assigned.

Fundbox. " What Is the Difference Between Factoring and Accounts Receivable Financing? " Accessed Sept. 10, 2021.

Meritus Capital. " What Is A Non-Notification Factoring Deal? " Accessed Sept. 10, 2021.

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assignment of accounts receivable without recourse

Letter of Assignment of Accounts Receivable with Non-Recourse :

  • Post author: LawFoyer
  • Post published: 7 August 2022
  • Post category: Agreement Draft
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  • Reading time: 1 mins read

Please fill out the following form. Please print your completed form if you would like to have a copy for your records.

FOR VALUE RECEIVED, the undersigned hereby assigns and transfers to (Name of the person or the company receiving the rights) all rights, title and interest in and to the account(s)receivable described as follows :

DESCRIPTION OF THE ACCOUNTS RECEIVABLES BEING Transferred

The undersigned warrants that the said account(s) are just and due and the undersigned has not received payment for same or any part thereof and has no knowledge of any dispute thereon; provided, however, that said account(s) are sold without recourse to the undersigned in the event of non-payment.

The undersigned further warrants that it has full title to said receivables, full authority to sell and transfer same, and that said receivables are sold free and clear of all liens, encumbrances or any known claims against said account(s).

This agreement shall be binding upon and inure to the benefit of the parties, their successors, assigns, and personal representatives.

Signed this day of :

_____________________

Signed in the presence of :

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assignment of accounts receivable without recourse

IMAGES

  1. Assignment of Accounts Receivable Non-Recourse Template

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  2. Boost Your Cash Flow with Non Recourse Accounts Receivable Assignment

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  3. ASSIGNMENT OF ACCOUNTS RECEIVABLE (Non-Recourse)

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  4. Accounting for the Sale of Accounts Receivable (With and Without

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  5. Assignment of Accounts Receivable Form

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  6. Letter of Assignment of Accounts Receivable with Non-Recourse

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VIDEO

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COMMENTS

  1. Assignment of Accounts Receivable: Meaning, Considerations

    Assignment of accounts receivable is a method of debt financing whereby the lender takes over the borrowing company's receivables. This form of alternative financing is often seen as less...

  2. Factor Accounts Receivable

    In effect, assignment without recourse is the same as an outright sale of the receivables. Accounting for this transaction is si mple because it is the same as the sale of any other asset. The holder records a loss for the difference between the proceeds and the book value.

  3. Assignment of Accounts Receivable

    Typically, the notice of assignment of accounts receivable is directed to an accounting department and is signed, acknowledged and returned to the factoring company without consideration of the waiver of defenses languages.

  4. The Difference Between Assignment of Receivables & Factoring of

    Assigning your accounts receivables means that you use them as collateral for a secured loan. The financial institution, such as a bank or loan company, analyzes the accounts receivable aging...

  5. Assignment of Accounts Receivable Journal Entries

    Assignment fee of 1% (500) Initial advance of 80% (40,000) Cash received from customers 6,000 Interest on advances at 9%, outstanding on average for 40 days (40,000 x 9% x 40 / 365 = 395) Journals Last modified November 26th, 2019 by Michael Brown About the Author

  6. Without Recourse: Meaning, Example, Vs. With Recourse

    Julia Kagan Updated May 10, 2022 Reviewed by Julius Mansa What Is Without Recourse? "Without recourse" means that one party cannot obtain a judgment against, or reimbursement from, a defaulting...

  7. Assignment of Accounts Receivable

    Company A assigned $73,000 of its accounts receivable to the bank as a security. During March 20X6, the company collected $70,000 of the assigned accounts receivable and paid the principle and interest on note payable to the bank on April 1. $3,000 of the sales were returned by the customers. Record the necessary journal entries by Company A.

  8. Accounts Receivable Factoring

    Types of Accounts Receivable Factoring. Broadly speaking, accounts receivable factoring can be categorized as follows: 1. Recourse vs. Non-Recourse Factoring. Recourse means that should a borrower's customer not pay, the factoring company will retain "recourse" over the borrower (the vendor), meaning they can demand repayment.

  9. Assignment of accounts receivable

    October 08, 2023 What is the Assignment of Accounts Receivable? Under an assignment of accounts receivable arrangement, a lender pays a borrower in exchange for the borrower assigning certain of its receivable accounts to the lender. If the borrower does not repay the loan, the lender has the right to collect the assigned receivables.

  10. PDF Account Receivables

    Assignment of accounts receivable is an agreement between a lend- ... able on a non-recourse, noti˜cation basis. Accounts receivable are sold outright, usually to a transferee (the factor) that assumes the full risk of collection, without recourse to the transferor in the event of a loss. Debtors are directed to send payments to the transferee.

  11. § 8:1. Factoring agreement—Assignment of accounts receivable without

    Factoring agreement—Assignment of accounts receivable without recourse—General form 23A WEST-LF § 8:1 James H. Walzer West's Legal Forms (Approx. 7 pages) 23A West's Legal Forms, Agen.

  12. Factoring Without Recourse

    Without Recourse Example. Company A factors $1,000,000 of its accounts receivable to Factors Inc. without recourse. The factor applies a 5% interest fee and retains 20% of the receivables, which will be paid when all receivables are collected. Company A will therefore receive in total $1,000,000* (1-0.05)=$950,000.

  13. Vanderbilt Law Review

    a concern's accounts receivable without recourse on the vendor for any credit loss and with immediate notice to the trade customers that payments ... But see Koessler, Assignment of Accounts Receivable, 33 . CALIF. L. REV. 40, 55, and references cited in note 44. 12. For figures see SAULNIER AND JACOBY, op. cit. supra note 10. 13. Id. ...

  14. Recourse vs. Non-Recourse Factoring

    Two Ways to Factor Factoring can either be recourse or non-recourse. While both provide consistent cash flow, it is important to know the difference between the two before making a decision on how to fund your company's working capital needs. Recourse Factoring

  15. Accounting for Factoring Receivables: How to Record ...

    If you're FastGrowth Company and accounting for factoring receivables without recourse, you'll make the following journal entries on their balance sheet: Record the amount sold ($375,000) as a credit in accounts receivable. Record the cash received ($318,750) as a debit in the cash account. Record the paid factoring fee ($18,750) as a debit ...

  16. Factoring of Accounts Receivable

    Example The following example illustrates the journal entries to record transactions related to factoring with and without recourse: On January 1, 20X5, Impatient Inc. factored its accounts receivable of $100,000 at a fee of 8%.

  17. Using Receivables to Generate Cash

    What are the methods used to generate cash from receivables? There are four basic methods: (1) pledge accounts receivable as collateral for a loan; (2) assign accounts receivable with recourse, also known as factoring; (3) assign accounts receivable without recourse, and (4) use accounts receivable as collateral for a standby letter of credit.

  18. Assignment of Accounts Receivable with Non-Recourse

    Assignment of Accounts Receivable with Non-Recourse This document is used to acknowledge receipt of full payment by one party (the Assignor) from the other party (the Assignee) and confirmation of assignment and transfer to the Assignee of all rights, title and interest in and to the account (s) receivable described in this document.

  19. Factoring Receivables Journal Entry

    Factoring receivables without recourse means that the company selling receivables will not bear the risk of nonpayment from customers. The risks are transferred to the factoring company at the time of sale of receivables.

  20. Assignment of accounts receivable with recourse template

    This Assignment of Accounts Receivable with Recourse Template can be used to quickly remove valuable receivables from the operating entity. Cash paid to the operating entity for the receivables is then quickly withdrawn as payments to the owner (or the holding entity) as salary, rents, loan payments, etc. Warning

  21. Assignment of Accounts Receivable Non-Recourse

    Assignment of Accounts Receivable Non-Recourse Published by TemplateGuru Admin on January 1, 2018 About this template: This particular legal document or agreement of assignment is used to assist in articulating the terms of a receivable account where there is no recourse.

  22. Non-Notification Loan: What It is, How It Works, History

    Non-Notification Loan: A full-recourse loan that is securitized by accounts receivable (AR). Customers making accounts-receivable payments are not notified that their account/payment is being used ...

  23. Letter of Assignment of Accounts Receivable with Non-Recourse

    description of the accounts receivables being transferred The undersigned warrants that the said account(s) are just and due and the undersigned has not received payment for same or any part thereof and has no knowledge of any dispute thereon; provided, however, that said account(s) are sold without recourse to the undersigned in the event of ...

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    While Algo Capital, Bit5ive and Uptime Armory listed $0 in assets, Bit5ive International reported $117,552 in assets from an uncollected loan to a third-party, and Uptime Hostings had $216,329.52 ...