July 12, 2024

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factor

A factor, Latin for “doer, maker” (from Latin facit, “to do, make”), is a mercantile fiduciary who receives and sells goods on commission (called factorage), transacting business in his own name and not disclosing his principal, and historically with his seat at a factory (trading post). A factor differs from a commission merchant in that a factor takes possession of goods (or documents of title representing goods) on consignment, whereas a commission merchant sells goods not in his possession on the basis of samples. Most modern factor business is in the textile field, but factors are also used to a great extent in the shoe, furniture, hardware, and other industries, and the trade areas in which factors operate have increased. In the UK, most factors fall within the definition of a mercantile agent under the Factors Act 1889 and therefore have the powers of such. A factor has a possessory lien over the consigned goods that covers any claims against the principal arising out of the factor’s activity. A debt factor, be it a person or firm (factoring company), accepts as assignee book debts (accounts receivable) as security for short-term loans; this is known as factoring.

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