Definition
The contract that sets advance rates, fees, recourse terms and duration.
Why it matters
Always review termination clauses and minimums before signing.
Where it shows up in a deal
The agreement is a master contract plus schedules: the body sets the structure and the schedules set rates per customer. Rates can usually be amended later; the body generally cannot. The clauses that decide what the relationship costs are the term, the notice period, the minimum, the repurchase trigger and the termination fee.
What it affects
- Auto-renewal with a short notice window is how a twelve-month deal becomes a twenty-four-month one.
- Cross-collateralization lets the funder apply reserves on one customer against losses on another.
- An exclusivity clause covering all accounts prevents you from keeping some invoices outside the facility.
- Repurchase obligations and the events that trigger them define your real downside, not the rate does.
The common mistake
Related terms
- Minimum VolumeA contractual minimum amount of invoices a client must factor each month.
- Term SheetA non-binding summary of proposed financing terms.
- Full-Recourse FactoringFactoring where the business must buy back invoices that customers don't pay.
- UCC-1 FilingA public notice that a lender has a security interest in a business's assets.
Questions about how factoring agreement affects your facility?
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