Assigned Book Accounts
or open accounts of a business, the title of which has been transferred
to a commercial credit company or to a bank as collateral for a loan.
This is a type of commercial loan which has been receiving increased
attention from commercial banks, as compared with low regard in part years,
in view of the satisfactory experience of finance companies with this
type of business under proper legal safeguards and operating supervision. Where state banking laws prohibit the actual purchase of accounts
receivable, because they are choses in action, and only permit loans on
the accounts, such loans can be made secured by the assignment of the
accounts, together with agreement for repurchase or substitution of accounts
in default, provision for repayment out of collections, and other safeguards,
lending either against individual accounts or under revolving loan agreement,
either on the notification or non-notification of debtor's basis.
The notification type is preferred, as it makes better collateral.
OF THE CURRENCY. Handbook
for National Bank Examiners, Section 207.1:
Accounts receivable Financing.