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:
A factor can have different meanings. In commercial transactions, a factor is a person who sells goods for a commission and takes possession of another's goods, selling them in their own name. This differs from a broker, who does not take possession of the goods.
A factor can also be a financier who provides money in exchange for an assignment of accounts receivable (A/R) or other security. Factoring is often used by manufacturing companies that have significant A/R on their books, which may represent their entire profits for the year. If a client cannot pay their debt before year-end, the manufacturing company may struggle to report a profit unless they find a way to collect the A/R.
Currently, there are no specific American statutes governing factoring. Instead, factoring functions as a business tool to improve cash flow and assist with accounting rather than a legislative enactment like tort or criminal law.
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.