Accounts Receivable Financing Agreement Template for New Zealand

An Accounts Receivable Financing Agreement allows you to convert your unpaid invoices into immediate cash by selling them to a financier. This commercial arrangement provides working capital while transferring collection responsibilities, making it an attractive alternative to traditional bank loans or overdraft facilities.

When do you need this document?

You need this agreement when your business faces cash flow gaps despite having substantial unpaid invoices from creditworthy customers. Manufacturing companies often use receivables financing to fund production cycles while waiting for customer payments. Service businesses with long payment terms, such as consulting firms or contractors, rely on this arrangement to maintain operations between project completion and payment receipt. Growing businesses use receivables financing to fund expansion without diluting equity or taking on traditional debt. It's particularly valuable when you have seasonal sales patterns or large contracts with extended payment periods that strain your working capital.

Key legal considerations

The agreement must clearly define which receivables qualify for financing, typically excluding disputed invoices, those from related parties, or debts older than specific timeframes. You'll need to understand the recourse provisions—whether you remain liable if customers fail to pay or if the financier bears the credit risk. Pricing structures vary significantly, including discount rates, service fees, and potential additional charges for collections or administration. The agreement should specify collection procedures, including whether you or the financier will manage customer relationships and payment processes. Security arrangements often include personal guarantees from directors or charges over business assets. Termination clauses are crucial, particularly regarding outstanding advances and the return of unfunded receivables upon agreement end.

Legal requirements in New Zealand

Under New Zealand law, receivables financing arrangements must comply with the Personal Property Securities Act 1999 (PPSA), which governs security interests in personal property including accounts receivable. The financier must register their security interest on the Personal Property Securities Register to protect their priority against other creditors. The Contract and Commercial Law Act 2017 provides the framework for receivable assignments and establishes your obligations when transferring debts to the financier. If your business is a company, the arrangement must comply with Companies Act 1993 provisions regarding financial assistance and director duties. The Credit Contracts and Consumer Finance Act 2003 may apply if underlying receivables involve consumer credit or if the financing arrangement itself constitutes a consumer credit contract. You must ensure proper notification procedures to debtors when required and maintain accurate records of transferred receivables for both legal and accounting purposes.