A factor’s lien is a legal claim or security interest asserted by a factor, a financial intermediary or institution that purchases accounts receivable or invoices from a business. When a business sells its accounts receivable to a factor to obtain immediate cash, the factor may assert a factor’s lien on the accounts receivable as collateral. This lien gives the factor the right to collect payment directly from the debtor in the event of non-payment by the business. The factor’s lien helps secure the factor’s investment and mitigate the risk of non-payment. It is typically documented in a factoring agreement or contract between the business and the factor, outlining the terms and conditions of the transaction, including the rights and obligations of both parties regarding the accounts receivable.
A right to retain a property held on consignment until the amount due is paid by the consignor.
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This glossary post was last updated: 29th March 2024.
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