Accounts Receivable Purchase Agreement Template for Canada

An accounts receivable purchase agreement allows you to sell your outstanding customer invoices to a financial institution or factoring company in exchange for immediate cash. Under Canadian law, this sophisticated financing arrangement helps businesses improve cash flow by converting future receivables into working capital today. The agreement governs the sale and assignment of your accounts receivable, establishing clear terms for pricing, recourse provisions, and ongoing responsibilities.

When do you need this document?

You need an accounts receivable purchase agreement when your business requires immediate cash flow but cannot wait for customers to pay their invoices. Manufacturing companies often use this financing to bridge the gap between production costs and customer payments. Retail businesses may sell receivables during seasonal cash flow variations or when expanding operations. Service companies with long payment terms frequently utilize receivables financing to maintain steady working capital. The agreement is also essential when you want to transfer credit risk to a financial institution rather than managing collections internally.

Key legal considerations

The agreement must clearly define whether the sale is with or without recourse, determining your liability if customers fail to pay. Purchase price calculations should specify advance rates, fees, and reserve amounts to avoid disputes. The document must address servicing arrangements, including who collects payments and manages customer relationships. Representations and warranties about receivables quality protect the purchaser while limiting your ongoing liability. Default provisions should outline consequences of breach and remediation procedures. The agreement must also include proper assignment language to ensure valid transfer of ownership rights in the receivables.

Legal requirements in Canada

Under Canadian law, accounts receivable purchase agreements must comply with the Personal Property Security Act (PPSA) in each province to properly perfect security interests and establish priority rights. The purchaser typically files financing statements to protect their interest in the receivables against competing claims. Federal Bank Act requirements may apply when chartered banks are involved as purchasers. The agreement must address privacy obligations under the Personal Information Protection and Electronic Documents Act when customer information is transferred. Anti-money laundering compliance under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act is mandatory for financial transactions. For international receivables, the Assignment of Receivables in International Trade Act may govern cross-border assignments and provide additional protections.