What Security is Pledged for a Factoring Agreement?

When entering into a Factoring Agreement a Factor will take a first position on the account receivable as a minimum requirement for most clients and a personal guaranty is standard. Occasionally a primary lender normally a Bank may work with the Factoring Company by allowing them to take a First Priority Position on a portion of the receivables to help the client access more funding. If bank financing is already in place, the bank will hold a General Security Interest in all the assets of the Corporation. This is called a GSA.
More and More Factoring Agreements are also including a GSA on all the assets of the Corporation to offset risk and allow the client to access higher advances and lower fees. It sometimes just provides a comfort level to the Factor so they will fund an account that may or may not be meeting the approval of the credit department using just the receivables as collateral.