A template invoice factoring agreement, under which a finance company (the "Factor") purchases a business's unpaid invoices (book debts) and advances funds against them, governed by the law of England & Wales.
How to use this template - Replace every
[SQUARE-BRACKET]field before use. - Factoring is a form of business finance (the Factor buys your receivables and usually collects them. Decide whether it is recourse (you bear the risk of non-payment) or non-recourse (the Factor bears agreed credit risk)) clause 6. - Assignment of debts and any security may need registration (for example, company charges at Companies House); take advice. - Have a solicitor review before use.
---
THIS FACTORING AGREEMENT is made on [DATE]
BETWEEN (1) [FACTOR NAME] of [ADDRESS / COMPANY NUMBER] (the "Factor"); and (2) [CLIENT NAME] of [ADDRESS / COMPANY NUMBER] (the "Client").
Agreed terms
1. Purchase of debts. The Client will offer, and the Factor will purchase, the Client's [trade debts / receivables] arising from sales to its customers (the "Debts"), on the terms of this Agreement, by way of assignment. An assignment will take effect as a legal assignment only where the statutory requirements are satisfied, including written notice to the debtor (Law of Property Act 1925, s 136); in the absence of such notice, it will operate as an equitable assignment only until notice is served.
2. Notification. [Disclosed factoring: customers will be notified to pay the Factor. / Confidential factoring: customers are not notified, and the Client collects as the Factor's agent. Note: under confidential factoring, the assignment will generally operate as an equitable assignment (not a legal assignment) until written notice is given to the debtor. A debtor who pays the Client before receiving notice may thereby discharge the debt, and the Factor's priority against competing assignees or insolvency may be affected.]
3. Advance. The Factor will advance up to [NUMBER]% of the value of each approved Debt on purchase, with the balance (the retention) paid on collection, less the Factor's charges.
4. Charges. The Client will pay: a service fee of [NUMBER]% of invoice value, and a discount/finance charge of [NUMBER]% [per annum] on funds advanced, as set out in Schedule 1.
5. Collection. [The Factor / the Client as the Factor's agent] will collect the Debts. The Client will provide invoices, statements and information as required.
6. Recourse. This is a [recourse / non-recourse] facility. [Recourse: the Client must repurchase, or the Factor may recover, any Debt unpaid after [NUMBER] days. / Non-recourse: the Factor bears the credit risk on approved Debts up to the agreed limit, except in cases of dispute or breach of warranty.]
7. Warranties. The Client warrants that each Debt is valid, owing, free from dispute and encumbrance, and arises from a genuine sale, and that it has the right to assign it.
8. Default and termination. The Factor may suspend funding or terminate on the Client's material breach, insolvency, or breach of warranty. Either party may terminate on [NUMBER] days' notice, subject to settlement of outstanding amounts.
9. Security and further assurance. The Client will execute any documents and provide any security reasonably required, and assist with registration and perfection.
10. Governing law and jurisdiction. This Agreement is governed by the law of England and Wales, whose courts have exclusive jurisdiction.
Execution
Signed for [FACTOR NAME]: __________________ Date: [DATE]
Signed for [CLIENT NAME]: __________________ Date: [DATE]
Schedule 1, Charges, advance rate and limits
--- This template is a starting point and not legal advice. Factoring involves assignment of debts, security and possible registration, have a qualified solicitor review and adapt it before use. Governing law: England & Wales.