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Unlike in securitisation where the SPV pays off the mortgage finance company with the proceeds of the bonds issue, a factoring agency does not resort to issue of bonds back to back but instead pay a portion of the receivables upfront with the remaining being paid at regular intervals as and when debts are collected.
Accounts receivable is the amount owed to a seller by a customer. As such, it is an asset, since it is convertible to cash on a future date. Accounts receivable is listed as a current asset on the balance sheet, since it is usually convertible into cash in less than one year.
The primary difference between factoring and bank financing with accounts receivables involves the ownership of the invoices. Factors actually buy your invoices at a discounted rate, while banks require you to pledge or assign the invoices as collateral for a loan.
The purpose of assigning accounts receivable is to provide collateral in order to obtain a loan. To illustrate, lets assume that a corporation receives a special order from a new customer whose credit rating is superb. However, the customer pays for its purchases 90 days after it receives the goods.
Assignment of accounts receivable is a lending agreement whereby the borrower assigns accounts receivable to the lending institution. In exchange for this assignment of accounts receivable, the borrower receives a loan for a percentage, which could be as high as 100%, of the accounts receivable.
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To record this transaction, youd first debit accounts receivableKeiths Furniture Inc. by $500 again to get the receivable back on your books, and then credit revenue by $500.
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.
Assignment of accounts receivable is a lending agreement whereby the borrower assigns accounts receivable to the lending institution. In exchange for this assignment of accounts receivable, the borrower receives a loan for a percentage, which could be as high as 100%, of the accounts receivable.
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.
Assignment and factoring are methods to generate cash from accounts receivable (B). Assigning accounts receivable allows a company to get a loan and use the accounts receivable as collateral. Once they receive the cash receipts from customers they must pay their loan off.

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