Full question:
What are the statutes(Federal and State) for factoring? Meaning when you have a manufactured good or a good in the process of being manufactured, and the factor invests in the good or inventory and the factor gets paid when the goods are sold. Do factoring laws still exist today.
- Category: Misc
- Date:
- State: Missouri
Answer:
Factor is subject to different meanings. In the context of commercial transactions, a factor is a person who sells goods for a commission. A factor takes pssession of goods of another and usually sells them inhis/her own name. A factor differs from a broker in that a broker normally doesn't take possession of the goods. A factor may be a financier who lends money in return for an assignment of accounts receivable (A/R) or other security.
Most of the time factoring is used when a manufacturing company has a large A/R on the books that would represent the entire profits for the company for the year. That particular A/R might not get paid prior to year end from a client that has no money. That means the manufacturing company will have no profit for the year unless they can figure out a way to collect the A/R.
We are not aware of American factoring laws being created by statutes. The "law" is not a legislative enactment regulated and enforced by government such as tort law or criminal law. Instead it serves more as a business tool for improving a business' cash flow or aiding with accounting in other ways.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
