True sale

When the law and the contract treat the assignment of invoices as a real sale rather than collateral for a loan.

Why it matters

True sale treatment can determine whether the factor has enforceable rights if the seller enters bankruptcy. If a court recharacterizes the transfer as a loan, the factor may lose priority over other creditors.

Related terms

Related article: UCC filing in factoring

Related reading

Sources

  • Uniform Commercial Code Article 9 - Uniform Law Commission. Accessed 2026-05-19. Reference for secured transactions concepts including receivables and filings.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.