Factoring Receivables Agreement for the United Kingdom

Factoring Receivables Agreement Template for England and Wales

A Factoring Receivables Agreement is a commercial contract governed by English and Welsh law that enables businesses to sell their accounts receivable to a specialized financial institution (factor) at a discount. This agreement sets out the terms under which the factor will purchase receivables, including purchase price calculations, representations and warranties, collection procedures, and risk allocation. It's a crucial tool for businesses seeking to improve cash flow through the monetization of their receivables while potentially outsourcing credit management and collection functions.

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What is a Factoring Receivables Agreement?

The Factoring Receivables Agreement is designed for businesses seeking to improve their working capital position by converting unpaid invoices into immediate cash. This contract type, governed by English and Welsh law, establishes a continuing relationship where a business can sell its receivables to a financial institution, typically at a discount to face value. The agreement covers crucial aspects such as eligibility criteria for receivables, purchase price mechanisms, collection procedures, and risk allocation between parties. It's particularly valuable for growing businesses or those operating in sectors with extended payment terms, providing both funding and potentially administrative support in managing receivables.

What sections should be included in a Factoring Receivables Agreement?

1. Parties: Identification of the Factor and the Client (seller of receivables)

2. Background: Context of the agreement and basic commercial understanding

3. Definitions and Interpretation: Key terms including Receivables, Eligible Receivables, Purchase Price, etc.

4. Sale and Purchase of Receivables: Core provisions regarding the assignment of receivables

5. Purchase Price and Payment Terms: Calculation method and timing of payments

6. Representations and Warranties: Client's warranties regarding receivables and business

7. Covenants: Ongoing obligations of the Client

8. Collection and Administration: Process for collecting receivables

9. Events of Default: Circumstances constituting default and consequences

10. Termination: Terms for ending the agreement

What sections are optional to include in a Factoring Receivables Agreement?

1. Security Provisions: Additional security arrangements when security is required beyond assignment

2. Credit Insurance: Provisions regarding insurance of receivables when receivables are insured

3. Cross-Border Provisions: Specific provisions for international receivables when dealing with international debtors

4. Confidentiality: Detailed confidentiality obligations when standard confidentiality provisions are insufficient

What schedules should be included in a Factoring Receivables Agreement?

1. Eligibility Criteria: Detailed criteria for acceptable receivables

2. Form of Notice to Debtors: Template notice informing debtors of the assignment

3. Operating Procedures: Detailed procedures for day-to-day operations

4. Pricing Schedule: Detailed fee structure and calculations

5. Form of Offer: Template for offering receivables for purchase

6. Excluded Debtors: List of debtors whose receivables are not eligible

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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What is a Factoring Receivables Agreement?

What sections should be included in a Factoring Receivables Agreement?

What sections are optional to include in a Factoring Receivables Agreement?

What schedules should be included in a Factoring Receivables Agreement?

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