Assignment Of Proceeds
You loaned money to a friend, and now he's paying you back in installments. Meanwhile, you recently bought a different friend's sous vide machine (because you really want to get into high-end cooking, and he bought it two years ago, used it once and now it just sits in his basement).
Instead of getting cash from your money-borrowing friend and giving it to your fancy-cooking friend, you decide to skip the middle man. You tell Friend A to just give the money he owes you to Friend B.
That's essentially assignment of proceeds.
In general terms, this type of transaction happens when one party transfers the funds generated from a letter of credit to a third party. Basically, a company is owned money, but strikes a side deal for someone else to become the beneficiary of any funds generated from that debt.
Related or Semi-related Video
Finance: What is a Beneficiary?25 Views
Finance a la shmoop.. what is a beneficiary? well in Latin, bene is
good so this is like a good place to catch fish...well close not [Old man fishing in the ocean]
really but being a beneficiary is good it means you get stuff like if you are
the beneficiary of weird uncle Al's will then you get his odd collection of hair
balls shaped like US presidents and thirty two thousand two hundred sixty [Uncle Al's will appears]
$9.32... in essence then you are the beneficiary of his will you are the one
set up to benefit by the death of someone who wanted to favor you with
their assets when they had you know passed on to the great beyond where hair [Uncle Al with white wings in heaven]
balls will fall....
Up Next
What are accounts receivable and accounts payable? Accounts receivable and payable are figures that show up on a company’s balance sheet. Account...
What is a line of credit? A line of credit is kind of like a loan. A bank gives a borrower a line of credit, which basically says they can borrow â...
What is the difference between short-term and long-term liabilities? Short-term liabilities show up on the balance sheet. They need to be paid in t...