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04-10-2014, 03:42 PM #3
- Join Date
- Mar 2014
- Location
- Ann Arbor, Michigan
- Posts
- 1,289
Hi Ryan- the courts might disagree.
There have been cases where factors who use a standard Purchase and Sale Agreement clearly stating that the transaction is the sale of invoices and not a loan have had a court take the position that regardless of the documentation the facts of the transaction made it a secured loan. Further the P&S agreemdnt was nothing more then a security agreement.
The key criteria was, and still poses a problem, if the factor is taking a lien on effectively all the business assets and the owner guarantees payment of the business obligation then how can you say you have purchased an invoice instead of making a loan against it.
Happily this has been only effected state courts so far.
I invite any questions about factoring.
Thanks, Bob
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