Debt Factoring Agreement

Debt Factoring Agreement Template for United States

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Key Requirements PROMPT example:

"I need a Debt Factoring Agreement for my manufacturing company to factor up to $5 million in receivables, with specialized provisions for international debtors and credit insurance requirements."

Document background

The Debt Factoring Agreement is essential for businesses seeking to improve cash flow by monetizing their accounts receivable. This agreement, governed by United States law, establishes a relationship where a business can sell its invoices to a specialized financial institution (Factor) at a discount, receiving immediate cash while transferring collection rights. The document comprehensively addresses purchase mechanics, credit risk, operational procedures, compliance requirements, and security arrangements. It's particularly valuable for businesses with significant B2B sales, long payment terms, or rapid growth needs. The agreement ensures compliance with the UCC and relevant federal/state regulations while providing flexibility to accommodate various business needs and industry-specific requirements.

Suggested Sections

1. Parties: Identifies the Factor and the Client (seller of receivables)

2. Background: Sets out the context of the agreement and the parties' intentions

3. Definitions: Defines key terms used throughout the agreement

4. Purchase of Receivables: Core provisions regarding the sale and purchase of receivables, including pricing mechanism

5. Assignment and Transfer: Provisions governing the transfer of rights in the receivables

6. Representations and Warranties: Client's warranties regarding business, receivables, and authority

7. Client Undertakings: Ongoing obligations of the Client throughout the agreement term

8. Factor's Rights and Obligations: Key responsibilities and rights of the Factor

9. Operational Procedures: Day-to-day procedures for submitting and processing receivables

10. Fees and Charges: Detailed fee structure and payment terms

11. Recourse and Indemnification: Provisions for when receivables default and associated indemnities

12. Events of Default: Circumstances constituting default and consequences

13. Termination: Provisions for ending the agreement and post-termination obligations

14. Confidentiality: Protection of confidential information

15. Governing Law and Jurisdiction: Choice of law and dispute resolution provisions

16. General Provisions: Standard boilerplate clauses including notices, amendments, and assignment

Optional Sections

1. Security Arrangements: Additional security provisions when collateral beyond receivables is required

2. Credit Insurance: Provisions regarding credit insurance when required by the Factor

3. Electronic Trading Platform: Terms for using electronic systems for receivables management

4. International Provisions: Additional terms for cross-border factoring arrangements

5. Reserve Account: Terms governing the maintenance and operation of a reserve account

6. Bulk Factoring Provisions: Special terms for bulk factoring arrangements

7. Customer Service Arrangements: Terms for when the Factor handles customer service functions

8. Data Protection: Additional provisions required for handling personal data in consumer receivables

Suggested Schedules

1. Schedule 1 - Eligible Receivables Criteria: Detailed criteria for receivables that can be factored

2. Schedule 2 - Fee Schedule: Detailed breakdown of all fees, charges, and calculation methods

3. Schedule 3 - Operational Procedures Manual: Detailed procedures for daily operations and submissions

4. Schedule 4 - Form of Notice of Assignment: Template for notifying debtors of the assignment

5. Schedule 5 - Approved Debtors List: List of pre-approved debtors and their credit limits

6. Schedule 6 - Required Documents: List of documents required for verification of receivables

7. Appendix A - Reporting Requirements: Templates and requirements for periodic reporting

8. Appendix B - Power of Attorney: Form of power of attorney for Factor's collection rights

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok��˰� | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Manufacturing

Wholesale Trade

Construction

Transportation and Logistics

Textile and Apparel

Healthcare

Professional Services

Technology

Industrial Supply

Retail

Agriculture

Food and Beverage

Import/Export

Relevant Teams

Finance

Legal

Treasury

Credit Control

Accounts Receivable

Operations

Risk Management

Compliance

Commercial

Collections

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Credit Manager

Accounts Receivable Manager

Commercial Director

Risk Manager

Financial Controller

Operations Manager

Business Development Manager

Legal Counsel

Compliance Officer

Contract Manager

Collections Manager

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Debt Factoring Agreement Template for United States

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