What does a factor's lien allow a second company to do with merchandise?

What does a factor's lien allow a second company to do with merchandise?

• A. Keep it permanently
• B. Hold it until payment is made
• C. Sell it immediately
• D. Donate it to charity

Answer: (B)

The factor's lien allows a second company to hold merchandise until payment is made. This legal right is commonly associated with factoring, where a business sells its receivables to a third party (the factor) to improve cash flow. In this arrangement, the factor obtains a lien on the goods provided as collateral, ensuring that they have a claim to these assets if the original seller does not fulfill their obligations, usually the repayment of the advance. This means the second company can retain possession of the merchandise and wait for the payment of the underlying debt to be settled before taking further action regarding the merchandise.

The factor's lien allows a second company to hold merchandise until payment is made. This legal right is commonly associated with factoring, where a business sells its receivables to a third party (the factor) to improve cash flow. In this arrangement, the factor obtains a lien on the goods provided as collateral, ensuring that they have a claim to these assets if the original seller does not fulfill their obligations, usually the repayment of the advance. This means the second company can retain possession of the merchandise and wait for the payment of the underlying debt to be settled before taking further action regarding the merchandise.