Master Factoring Agreement Template for the United States

A Master Factoring Agreement is a comprehensive contract that establishes the legal framework for selling your accounts receivable to a factoring company. Under United States law, this agreement enables your business to convert outstanding invoices into immediate cash flow while maintaining compliance with federal and state regulations. The document serves as the foundation for an ongoing business relationship where you sell your receivables at a discount in exchange for immediate funding.

When do you need this document?

You need a Master Factoring Agreement when your business requires immediate cash flow but cannot wait for customers to pay their invoices. This is particularly common in industries with extended payment terms, such as manufacturing, transportation, staffing, and government contracting. The agreement becomes essential when traditional bank loans are unavailable or insufficient, when you need to fund rapid growth, or when seasonal fluctuations create cash flow gaps. Many businesses use factoring during startup phases or when pursuing large contracts that require upfront capital investment.

Key legal considerations

Several critical legal elements must be addressed in your Master Factoring Agreement. The purchase and sale terms must clearly define which accounts are eligible for factoring and establish the factor's recourse rights. Representations and warranties require you to guarantee the validity and collectibility of sold receivables, creating potential liability if accounts prove uncollectible. Pricing structures, including discount rates and fees, must be clearly disclosed to comply with federal truth-in-lending requirements. The agreement should address notification procedures for account debtors, collection responsibilities, and dispute resolution mechanisms. Security interest provisions must comply with UCC Article 9 filing requirements to protect the factor's interests in purchased receivables.

Legal requirements in United States

United States factoring agreements must comply with multiple layers of federal and state regulation. UCC Article 9 governs the creation and perfection of security interests in accounts receivable, requiring proper filing of financing statements to establish priority. The Assignment of Claims Act applies when factoring government receivables, imposing specific notice and approval requirements. Federal Trade Commission Act provisions prohibit unfair or deceptive practices in factoring relationships, mandating clear disclosure of terms and fees. Bank Secrecy Act and Anti-Money Laundering regulations require factors to implement customer identification and suspicious activity reporting programs. State usury laws may limit applicable interest rates and fees, while consumer protection statutes can affect factoring of consumer receivables. Additionally, industry-specific regulations may apply, such as Department of Transportation requirements for freight factoring or healthcare regulations for medical receivables factoring.