Factoring Agreement

Client (Seller): [Business Name] · Factor: [Factoring Company Name] · Date: [Date]

1. Sale of Receivables

Client agrees to sell, and Factor agrees to purchase, eligible accounts receivable (invoices) from Client's approved customers, on a [recourse/non-recourse] basis.

2. Advance Rate

Factor will advance [%] of the face value of each purchased invoice upon submission, with the remaining balance (the "reserve"), less fees, released to Client after the customer pays in full.

3. Factoring Fee

Factor's fee is [%] of the invoice value, [flat / increasing over time the invoice remains unpaid], deducted from the reserve upon collection.

4. Recourse (if applicable)

If this Agreement is on a recourse basis: if a customer fails to pay a purchased invoice within [Period], Client must repurchase that invoice from Factor or replace it with another eligible invoice.

5. Notice to Customers

Client will notify its customers that invoices have been sold to Factor and direct them to remit payment directly to Factor.

6. Eligible Receivables

[Define what makes an invoice "eligible" — e.g. customer creditworthiness approved by Factor, invoice age under [X] days, no existing dispute.]

7. Term and Termination

This Agreement runs [Term] and either party may terminate with [Notice Period] notice, subject to Client's obligations on invoices already purchased.

Client: ______________________ Date: ____________ Factor: ______________________ Date: ____________

*This document is provided for informational and educational purposes only and does not constitute legal advice. The difference between recourse and non-recourse factoring (Section 4) matters enormously — with recourse factoring, the business selling the invoice still bears the credit risk if its customer doesn't pay, which many businesses don't realize until it happens.*