Account Receivable Purchase Agreement Template for the United States

An Account Receivable Purchase Agreement is a specialized financial contract that allows your business to sell its accounts receivable to a third party, typically a factoring company or financial institution. This arrangement provides immediate access to cash tied up in outstanding invoices, helping you maintain steady cash flow and fund operations without waiting for customers to pay their bills.

When do you need this document?

You'll need this agreement when your business faces cash flow challenges due to extended payment terms or slow-paying customers. Manufacturing companies often use receivables factoring to bridge the gap between production costs and customer payments. Service businesses with net-30 or net-60 payment terms frequently rely on these agreements to cover payroll and operational expenses. Rapidly growing companies may use receivables purchase agreements to fund expansion without taking on debt. Seasonal businesses also benefit from this arrangement during off-peak periods when cash flow is limited but fixed expenses continue.

Key legal considerations

The agreement must clearly establish a "true sale" of receivables rather than a secured loan to avoid regulatory complications under the Truth in Lending Act. You'll need comprehensive representations and warranties about the validity and collectibility of your receivables, including confirmation that they're free from liens or disputes. The purchase price calculation methodology requires careful attention, typically involving a discount rate that reflects collection risk and time value of money. Collection procedures must comply with the Fair Debt Collection Practices Act, particularly regarding how the purchaser contacts your customers. Risk allocation provisions determine who bears losses from uncollectible accounts, with recourse agreements requiring you to repurchase defaulted receivables. Notification requirements to account debtors must be clearly defined, as customer relationships can be affected when a third party begins collection efforts.

Legal requirements in United States

Under the Uniform Commercial Code Article 9, the agreement must properly document the assignment of receivables and may require UCC-1 financing statement filings to perfect the purchaser's interest. Federal Assignment of Claims Act provisions apply when selling receivables owed by government entities, requiring specific notice and approval procedures. The agreement must include required disclosures under federal consumer protection laws when applicable. Interstate commerce considerations may trigger additional federal regulations depending on the geographic scope of your receivables portfolio. State-specific variations in commercial law may affect enforceability, particularly regarding notification requirements and collection procedures. Anti-assignment clauses in your underlying customer contracts must be reviewed, as they may restrict your ability to sell certain receivables. The agreement should address compliance with state licensing requirements for debt collection activities and factoring operations.