American Factoring Law with 2017 Cumulative Supplement

A must-have reference for attorneys, factors, their clients, bankers, accountants, judges, and businesspersons who sell or purchase goods or services.



Main Volume Information

American Factoring Law delves into the complex topics involved in factoring by American factors, including:

  • When a sale constitutes a “true sale” of the accounts to the factor, and when it does not
  • The nature and treatment of a factor’s “advances” to its client
  • The timing and character of a factor’s charge-back of purchased accounts to the client, and distinctions between charge-backs rooted in “quality” recourse from those rooted in “credit” recourse
  • Factoring of accounts without recourse, as compared to the factoring of accounts on a partial nonrecourse, partial recourse, split risk, or a full recourse basis
  • Accounting for factoring transactions under GAAP, from both the factor-side and the client-side, with illustrations from actual SEC filings, and coverage of the effects of newly enacted SFAS No. 166, an amendment of SFAS No. 140 (eff. 2010)
  • Litigation between factors and their clients, factors and client customers, factors and guarantors of the client, factors and third-party lenders, factors and third party factors, inter se, factors and bankruptcy estates, and factors and tax authorities
  • Issues that arise when a factor’s client goes bankrupt, including the impact of the “automatic stay;” whether and when the factored accounts constitute “cash collateral” of the bankrupt client; when and what “adequate protection” must be provided to the factor; and the use of factoring as a form of post-petition, debtor-in-possession (DIP) financing
  • Difference between full guarantees, limited guarantees, and validity guarantees taken by factors, and how they do (or should) impact the “true sale” analysis
  • Relationships between the factor and its funding sources, including refactoring, participation agreements among factors, and relationships between factors and their lenders who provide rediscounting credit lines
  • Purchase order financing and letters of credit provided by factors
  • Takeover transactions involving factors, whether by buyout of an existing factor’s position or by a new factor coming in “on top” of an existing factor’s position
  • Tax matters relevant to factors, including set-offs by the government, as a unitary creditor, when governmental accounts are factored; when a particular funding transaction is and is not treated as a "true sale" for federal income tax purposes; and how factors deal with federal tax liens and with levies by federal tax authorities, as well as subordination agreements between factors and the IRS 

Supplement Information

The 2017 Cumulative Supplementhas been expanded to include:

  • a review of a bankruptcy court’s rulings in “preference” litigation brought by a Chapter 11 debtor against two old-line factors in Dots, LLC v. Milberg Factorsseeking to recover pre-petition payments made to the factors, including an extensive review and critique of the court’s recognition of the factors’ “new value” defense under Section 547(c)(4) of the Bankruptcy Code
  • a comprehensive discussion of the legal and business issues in the pending Ninth Circuit litigation S&H Packing & Sales. v. Tanimura Distributing, concerning whether the court’s prior ruling in Boulder Fruit Express should be jettisoned in favor of a “transfer of risk” analysis, and whether a “true sale” of accounts was created
  • a useful overview of how old-line factoring evolved in America, how factoring contributed to the development of the modern UCC, and why old-line factoring creates a true-sale of accounts
  • a detailed example of the accounting entries from both the factor-side and the client-side, which clearly demonstrates the difference between old-line factoring and secured lending with full recourse, i.e., asset-based lending (ABL)
  • Recent developments in the factoring industry and the impact of economic forces, with a focus on the monetary policies of the Federal Reserve and other central bankers
  • A comprehensive review of historical decisions on factoring law from the courts of England, several of which were recently located and originally cited by American judges developing early American factoring law
  • An expanded chapter covering supply chain financing (reverse factoring) as well as recent court rulings on purchase order financing, litigation funding, and merchant cash advance (MCA) transactions
  • A review of recent judicial decisions on the true-sale of accounts to a factor
  • Discussion of disputes between factors and account debtors, including a commercial factor's action against an alleged account debtor who paid the factor’s client over notice, and the factor’s associated claim for conversion. 
  • A wealth of new material on bankruptcy issues which impact commercial factors such as factors denying an individual debtor’s general bankruptcy discharge or the particular indebtedness to the factor, and the difference between a post-petition “recoupment” and a post-petition "set-off "



Bloomberg BNA authors and editors are practicing professionals with insider perspectives and real-life experience. Learn more about this book’s authors and editors.
David B. Tatge is the principal of David B. Tatge, PLLC in Oak Hill, Virginia.
David Flaxman is Executive Vice President and former General Counsel at Rosenthal & Rosenthal, Inc., New York, NY.
Jeremy B. Tatge is Manager of Capitol National Factors Company, LLC in Oak Hill, VA
Robert W. Franklin is a Director and Assistant Chief Counsel at CIT Commercial Services, Charlotte, NC. (Co-author of the 2016 Cumulative Supplement only.)


View full tables of contents and read the book’s preface or introduction.


Read what others have to say about this Bloomberg BNA book.

. . .a comprehensive treatise covering the business and legal aspects of the factoring industry ... a must read for professionals who work in the business ... not written in legalese and ... an easy read for the well informed business person.... The research and writing that went into the making of this book is phenomenal.

Read the complete review

Steven N. Kurtz, Esq., Co–General Counsel to IFA

Commercial Factor, May/June 2014

American Factoring Law ... is a comprehensive, well organized, exhaustively researched and, above all, clear statement and explanation of modern factoring law. Whether you are a neophyte in the world of factoring or a seasoned practitioner, this book is a must-have for your law library, and possibly for your own office bookcase.

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Mary H. Rose, Buchalter Nemer PC, Los Angeles, CA

American Bankruptcy Institute Journal, October 2011

American Factoring Law is the first comprehensive treatise on factoring law in America. It offers a detailed, practical analysis of legal and business issues faced by factors, their clients, account debtors, guarantors, third-party lenders, and taxation authorities. American Factoring Law is unrivalled in its coverage and analysis of asset-based lending and commercial finance.

Read the complete review

UVA Lawyer, Spring 2011

Writing a book about the legal issues affecting the factoring industry is a daunting task. American Factoring Law has lived up to and has conquered this challenge. The book is well written and meticulously addresses the legal and business issues which affect the factoring industry… a valuable resource for professionals who work in and service the factoring industry. I look forward to using the book on a regular basis. 

Steven N. Kurtz, Levinson Arshonsky & Kurtz, LLP, Sherman Oaks, CA; Co–General Counsel, International Factoring Association

Factoring is one of those things that most commercial lawyers know a little about. The problem is that a little knowledge is a dangerous thing. Fortunately, David Tatge, David Flaxman, and Jeremy Tatge lead us from danger with their comprehensive treatise American Factoring Law. From the historical development of American factoring to the use of factoring in tax planning, the authors clearly and concisely answer the questions that need to be asked when factoring is involved.

Robin E. Phelan, Haynes and Boone, LLP, Dallas, TX