Rec Purchase Agreement Template for the United States

A Rec Purchase Agreement is a commercial contract that allows your business to sell accounts receivable to a third party purchaser for immediate cash flow. Under United States law, this agreement must comply with the Uniform Commercial Code and various federal regulations to ensure the transaction constitutes a true sale rather than a secured financing arrangement.

When do you need this document?

You need a Rec Purchase Agreement when your business requires immediate cash flow from outstanding invoices rather than waiting for customer payments. This document is essential for factoring arrangements where you sell receivables to a factor at a discount for immediate funds. Manufacturing companies often use these agreements to maintain working capital while waiting for large contract payments. Healthcare providers frequently utilize receivables purchases to convert insurance claims into immediate revenue. Technology companies may employ this structure to monetize subscription receivables or licensing fees before they mature.

Key legal considerations

The agreement must establish clear true sale criteria to avoid recharacterization as a secured loan under bankruptcy law. Purchase price mechanisms should specify whether the sale is with or without recourse, affecting your liability if customers default. Representations and warranties sections require careful attention as you'll typically guarantee the validity and collectibility of sold receivables. Servicing arrangements must define whether you or the purchaser will collect payments from customers. The agreement should address credit enhancement features such as reserve accounts or guarantees. Eligibility criteria for receivables help determine which invoices qualify for sale. Notification provisions specify whether customers will be informed of the sale, impacting your ongoing relationships.

Legal requirements in United States

Under the Uniform Commercial Code Article 9, the agreement must properly document the transfer to achieve perfection against third parties. Federal Assignment of Claims Act compliance is required if any receivables involve government contracts. Consumer protection laws including the Fair Debt Collection Practices Act apply if consumer receivables are involved in the transaction. Securities laws may require registration or exemption if the receivables are packaged for resale to investors. Banking regulations under Dodd-Frank affect true sale accounting treatment and capital requirements for financial institution purchasers. The agreement must include proper UCC Article 2 and Article 3 compliance for sales of goods and negotiable instruments components. State licensing requirements may apply depending on the purchaser's business model and the nature of receivables being acquired.