Why is a Factoring Notice of Assignment (NOA) important when selling your A/R?
Table of contents
- Why is a Factoring Notice of Assignment (NOA) important when selling your A/R?
- What is a notice of assignment in factoring?
What is a notice of assignment in factoring?
It is a letter that informs the business owner’s customers of your relationship with a factoring company. The notice of assignment letter is the first communication between the invoice factor company and the account debtor (your customer). The factoring contract spells out the change in invoice ownership.
The invoice factoring companies will send your customers, also known as debtors, a notice of assignment (NOA) letter. It will be sent immediately when you sell your unpaid receivables. The letter is also a standard document in factoring agreements. And accounts receivable (A/R) invoice factoring is a common financial product to accelerate the cash flows of small businesses.
Factoring invoices is a time-tested business funding solution to support operations and fund growth plans. Partnering with factoring companies allows your business to receive fast cash flow by selling invoices. Moreover, sending the NOA letter is a critical step to communicate your A/R has been assigned and is payable to the factoring company.
You can also read how factoring companies buy accounts receivable.
Complete Bankers Factoring online funding application to begin your debt-free funding process including Bad Debt Protection.
Contact Bankers Factoring to learn about the factoring NOA process and how we can provide consistent cash flow funding. We partner with you and your customers to provide an elite program for your business success.
What is a notice of assignment letter?
A Notice of Assignment (NOA) is a letter that informs account debtors their creditor (our client) is factoring invoices under the Universal Commercial Code (UCC). And invoice factoring is an agreement to assign your accounts receivable (A/R) to a factoring company. So the letter communicates that a third party (factoring company) is managing and collecting your A/R. An assignment letter notifies your customers or account debtors of the transfer in ownership.
The NOA letter is the first-time customers will learn that you are utilizing factor financing. But selling your unpaid invoices to a factoring company will not concern your customer. In addition, invoice funding is a popular financing vehicle to cover operating expenses and accelerate sales growth.
Keep reading, Factoring Company: What it is and Your Best Choice.
What is included in the factor financing NOA?
Factoring NOA letters are standard documents sent to customer (debtor) accounting departments. Assignment letters include language regarding the arrangement:
- NOA letter informs your customers that a factoring company is managing receivable invoices
- The notice includes language stating the factoring company has the right to payments
- Your business A/R has been assigned to a third party, and payment is transferred to them
- Updated information for making payments (remittance) to factor
- Notice of assignment letters include legal clauses related to the assignment
Assignment companies send NOA to establish their ownership and management position for your receivables. That’s because letting your customers know about the receivable assignment helps them make timely payments. Moreover, the factor provides specific remittance instructions to ensure an easy transaction for all parties involved.
Keep reading How Does a Factoring Company Work?
How does factoring NOA impact my customers?
Selling your receivables can cause stress about sending an NOA letter to your customer. However, invoice factoring demonstrates to your customers that you are serious about your operational performance by establishing financing lines. In fact, the US factoring market valued at $3.9 billion in 2022 shows how many companies use invoice services (IBISWorld).
Benefits of NOA factoring:
- Streamlined accounting process between your debtor’s accounts payable team and the factoring company.
- Partnering with a factoring company demonstrates your plans to grow your company and shows you are serious about your finances.
- Invoice factoring companies enhance customer service relationships by providing highly skilled professionals to communicate with your customers.
If your company works with commercial customers that demand extended credit terms, a factoring facility can help your cash flow.
Keep reading How Factor Financing Impacts Customer Relations.
Factoring Arrangement: Assignment of Accounts Receivable
A/R factoring is a type of business funding that injects working capital into companies with slow-paying customers. However, factoring agreements are not debt-financing like business loans and do not dilute your equity position. To know more, keep reading How to Finance Your Business Without Giving Up Equity.
Assigning accounts receivable lets your account debtors know you have transferred ownership of A/R. By selling your unpaid invoices, you receive two cash installments.
The initial cash advance, the first installment, ranges from 80 to 93% of your total A/R purchase value. And the second and final installment, rebate, or discount releases the remaining balance, less our fee. Therefore, the assignment of accounts receivable removes cash flow obstacles by bypassing the lengthy receivable period.
Notice of Assignment Factoring
Factoring your receivables is a great solution to overcome cash flow struggles. Additionally, factoring companies work closely with your customers allowing you to focus on your business. But with over 800 factoring companies in the US, finding a factoring company can be difficult. Bankers Factoring provides the best service with 20 years of experience. We make sure to communicate well with our customers while protecting our client’s interests.
Notice of assignment letters (NOA) can be scary for business owners unfamiliar with invoice factoring services. Most startups, small businesses, and companies extend credit terms requiring commercial funding. Offering net 30 to 120-day payment terms places cash flow problems for most entities.
Assignment letters should not turn you away from alternative financing. Your customers are familiar with NOA factoring and have other customers working with factoring companies.
Bankers Factoring Difference
Worrying about assignment letters only prevents your business from achieving its full potential. Bankers Factoring provides the best non-recourse factoring services and manages customer relations that enhance your business profile. Furthermore, we take on the credit risk from unpaid receivables while providing up to 93% cash advances. Accelerating your receivables cycle can unleash new sales growth and operational performance. Utilize free cash flow to improve profitability.