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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Thursday, November 16, 2023

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00

This CLE webinar will explore the dynamics of accounts receivable (A/R) factoring as a source of working capital financing. The panel will discuss the key differences between factoring and lending, how transactions are structured and documented, how risks are managed, and how to avoid common issues and pitfalls.

Faculty

R. Jay Gavigan
Partner
Venable LLP

Mr. Gavigan is an internationally recognized attorney who represents both borrowers and lenders in financing engagements. His experience includes representing builders, asset managers, REITs, funds, manufacturers, and commercial and residential mortgage bankers. He also represents commercial banks and direct lenders. Mr. Gavigan has advised on acquisition and leveraged finance, asset finance, syndicated credits, project finance, real estate finance, private placements, lease financing, and debt capital markets transactions. He also has significant experience with distressed credits and workouts. His practice includes cross-border financings and other transactions involving Europe, Asia, and Latin America.

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Leonela Vaccaro Padrón
Counsel
Venable LLP

Ms. Padrón represents borrowers and lenders in a broad range of financing transactions, with a particular focus on fund finance (subscription lines, net-asset-value facilities, GP, and management company lines of credit), direct lending, syndicated and bilateral working capital facilities, project financings, and warehouse financings, among others. She has served as senior legal counsel at a construction and development company, where she oversaw the legal workstreams related to PPP infrastructure projects in North America. Ms. Padrón also provided advice and input to project management and commercial teams on legal issues related to procurements and assisted in structuring certain aspects of the transactions, such as joint ventures among equity and operating partners, as well as the financing of the projects.

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Description

The factoring industry is growing at a rapid pace and the demand for factoring will likely continue. A/R factoring, often referred to as invoice discounting, is a source of liquidity for business borrowers that sell on credit terms. The transaction takes place between a business that generates accounts receivables and sells them, at a discount, to an entity (either a bank or non-bank lender or factoring company).

By selling the A/R to the purchaser, the business receives cash flows from the A/Rs earlier than if it had waited to receive payment directly from its customers on the A/Rs payment due date. The business also transfers the risk of its customer not honoring payments due under the purchased A/R to the purchaser. The purchase price of the A/R is a percentage of the face amount owed under the A/R. The differential between the face amount of the A/R and such A/R’s purchase price is designed to compensate the purchaser for acquiring the risk of non-payment and for the present value of the funds used for the purchase.

The key advantages of factoring include quick cash, no debt on the business-seller’s balance sheet, the transfer of non-payment risk to the purchaser, and the elimination of collections operations with respect to the sold A/Rs. However, while factoring provides the borrower with fast cash, it usually costs more than traditional borrowing.

Listen as our authoritative panel discusses the common types of factoring arrangements, how to negotiate and structure a factoring agreement, and common legal issues and pitfalls to avoid.

Outline

  1. Overview: legal concepts of factoring
    • Receivable factoring vs. traditional receivable financing
    • Cost
    • Application of Article 9 of the UCC
    • Deal flow and structure
    • Treatment of factoring in the context of bankruptcy
  2. Types of A/R factoring: recourse vs. nonrecourse
  3. Structuring a factoring transaction
    • Anatomy of a factoring agreement
    • Guarantees
    • Validity guarantees (bad boy)
    • Indemnification
    • Other terms and ancillary documents
  4. Advantages of factoring
  5. Disadvantages of factoring
  6. Key takeaways and practical considerations

Benefits

The panel will review these and other key issues:

  • How does A/R factoring compare to traditional term loans or operating lines of credit?
  • What are the advantages and disadvantages of A/R factoring?
  • What is the typical structure of an A/R factoring transaction?
  • What are the key provisions and terms to include in factoring documents from both the borrower’s and lender’s perspectives?