When a business is considering invoice factoring as a way to increase capital availability, they must be certain that their accounts receivables are clear to offer as collateral. If the business has used its assets to secure any credit from an individual or credit facility, chances are a UCC-1 financing statement was filed on that collateral. The Uniform Commercial Code (UCC) has a long history based on laws passed to modernize and codify the various individual state laws that apply to commercial transactions. You can read much more about the UCC here and here.
Where this specifically pertains to a factoring company who is interested in collateralizing their clients invoices, is the factor must have a secured position on those receivables. In lay terms, the UCC provides two functions with regard to lending capital. The first being the gate keeper, allowing any lender to know immediately if the collateral they are lending against has already been spoken for. And the second is to determine who those secured lenders are in the cases of liquidation of assets.