Abstract

Secured financing is of prime importance to the survival and growth of small and medium-sized businesses, and frequently is the only means whereby such enterprises can obtain working capital when neither risk capital nor unsecured credit is available in sufficient quantities. One method of secured financing, the financing of accounts receivable, plays a major role in supplying such capital, and with the enactment of the Uniform Commercial Code, particularly Article 9, in virtually all jurisdictions in the United States, this type of financing has come of age. This is not to say that the financing of accounts receivable was not widely utilized prior to the Code; but by clarifying and simplifying the law and by removing many of the legal obstacles, the Code has, to a great extent, made receivables financing legally safer, easier, and more economical for both the borrower and the lender. The Code implicitly recognizes that this method of secured financing is an integral part of our economy and should be accepted as such without prejudice. Nevertheless, although the Code has taken us a long way, the journey is not over—there are still many unresolved areas of the law and even some new problems which the Code has inadvertently created. The purpose of this article is (1) to focus on those sections of the Code which directly affect the financing of accounts receivable; (2) to relate those sections of the Code to current operational patterns in accounts receivable financing and discuss the changes which they may have wrought; (3) to highlight some of the areas yet to be resolved; and (4) to suggest some devices whereby the unresolved problems can be avoided or at least minimized.

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