Regressive factoring

[SurenHovakim]

Our company has initiated regressive factoring. In a few days we should get our money from the bank. Which are the accounting operations for this transaction?

 

[SurenHovakim]

I'm thinking
DT-cash
CT-accounts receivable
Then what? If the other party is not paying to the bank then we must pay.

 

[Counterofbeans]

You haven't given much information to go on, so it's difficult to even come close to an answer

When factoring, the first question is this: was it sold with recourse or without recourse? Without recourse is fairly easy. With recourse is a little more challenging, as the greater the control that the transferor retains over the receivables, the more likely the transfer will be accounted for as a secured borrowing rather than a sale (this is governed by ASC 860). I have no experience with "regressive factoring," but the comment, "then we must pay" sounds like something with recourse, so the accounting likely isn't so cut and dry

Further, is the factor charging you interest as well?

Do you have to worry about merchandise returns?

 

[SurenHovakim]

You haven't given much information to go on, so it's difficult to even come close to an answer

When factoring, the first question is this: was it sold with recourse or without recourse? Without recourse is fairly easy. With recourse is a little more challenging, as the greater the control that the transferor retains over the receivables, the more likely the transfer will be accounted for as a secured borrowing rather than a sale (this is governed by ASC 860). I have no experience with "regressive factoring," but the comment, "then we must pay" sounds like something with recourse, so the accounting likely isn't so cut and dry

Further, is the factor charging you interest as well?

Do you have to worry about merchandise returns?

Our company working with Spanish company which takes our equipments for rent with a long term contract. According to our contract they are going to make first payment at the beginning (January) of next year. The trouble is that we ran out of money and initiated factoring to borrow from the bank. The only type of factoring that they can offer is REGRESSIVE FACTORING (bank has a right to recourse) so if the Spanish company doesn't pay then our company should pay back to the bank.
Bank offer us following terms
15% of amount should be freezed in the bank until other party does pay plus other bank fees and percentages.
Suppose, that full amount is 100$ for factoring.
Bank is freezing 15$ and other 85$ bank paying to our company.
In this case accounting transactions for this transaction are
Debit- Bank account 85$
Debit- accounts receivable 15$ (BANK)
Credit- accounts receivable 100 (Spanish comp.)
& because it is regressive factoring
Debit- Optional liabilities (Off balance)
What's your opinion about this?