Fundamentals of Factoring

Fundamentals of Factoring, 4 Practical Law The Journal Vol. 7 (Sept.) 58 (2012), by David B. Tatge and Jeremy B. Tatge.

David Tatge coauthored an article titled "Fundamentals of Factoring."

Following is an excerpt:

Many businesses, both large and small, factor their accounts receivable (accounts). Factoring is sometimes wrongly perceived as a source of financing of last resort, favored by financially distressed companies that cannot obtain traditional bank financing. In fact, the majority of American factoring volume arises from contracts between large, old-line factors, many of which are bank owned or affiliated, and creditworthy client companies, many of which are in the apparel, textiles, furniture and footwear industries. Beyond these traditional factoring markets, factors today purchase accounts from clients in almost every industry, including electronics and other consumer goods, government contracts, medical services, construction, transportation and other service industries.

Prior to the financial crisis, annual American factoring volume rose to over $136 billion. This fell back in 2009, but is now growing again. Despite the prevalence of factoring in the US, many attorneys, accountants, finance professionals and judges have surprisingly little knowledge of this old form of commercial finance.

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