The Factoring and Security Agreement is essential when businesses seek to improve cash flow by monetizing their accounts receivable. This document, primarily used in the United States and governed by the UCC, serves dual purposes: it establishes the framework for the ongoing purchase of receivables and creates security interests in favor of the factor. The agreement is particularly valuable for businesses facing working capital needs or those seeking to reduce credit risk and administrative burden. It typically includes detailed provisions for purchase price calculations, representations about the quality of receivables, operational procedures, and remedies in case of default.
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1. Parties: Identification of the Factor and the Client/Seller
2. Background: Context of the agreement and business relationship
3. Definitions: Key terms used throughout the agreement including Eligible Receivables, Purchase Price, and Factor's Fee
4. Purchase and Sale of Receivables: Core terms of factoring arrangement including purchase mechanics and pricing
5. Security Interest: Grant of security interest in receivables and other collateral
6. Representations and Warranties: Statements of fact by the Client regarding business, receivables, and compliance
7. Covenants: Ongoing obligations of the Client including reporting requirements and operational restrictions
8. Events of Default: Circumstances constituting default under the agreement
9. Remedies: Factor's rights and remedies upon occurrence of an Event of Default
1. Recourse Provisions: Terms specifying when Factor has recourse against Client for uncollectible receivables
2. Collection Services: Terms governing Factor's collection services and related fees
3. Credit Insurance: Provisions regarding required credit insurance and allocation of premiums
1. Schedule of Fees: Detailed breakdown of factoring fees, charges, and calculation methods
2. Form of Notice of Assignment: Template for notifying account debtors of the assignment of receivables
3. Eligible Receivables Criteria: Detailed criteria for determining which receivables qualify for purchase
4. UCC Financing Statement: Form UCC-1 filing information and requirements
5. Existing Liens Schedule: Comprehensive list of existing liens and encumbrances on Client's assets
Relevant legal definitions
Accounts
Account Debtor
Advance Rate
Applicable Law
Assignment
Availability
Business Day
Collateral
Collection Period
Default Rate
Discount Fee
Eligible Receivables
Event of Default
Face Amount
Factor's Commission
Factoring Fee
Indebtedness
Ineligible Receivables
Invoice
Lien
Material Adverse Change
Maturity Date
Maximum Facility Amount
Net Face Value
Notice of Assignment
Obligations
Purchase Price
Purchased Receivables
Reserve Account
Reserve Percentage
Security Interest
Settlement Date
Supporting Documents
Term
Termination Date
UCC
Uncollected Receivables
Verification Rights
Account Debtor
Advance Rate
Applicable Law
Assignment
Availability
Business Day
Collateral
Collection Period
Default Rate
Discount Fee
Eligible Receivables
Event of Default
Face Amount
Factor's Commission
Factoring Fee
Indebtedness
Ineligible Receivables
Invoice
Lien
Material Adverse Change
Maturity Date
Maximum Facility Amount
Net Face Value
Notice of Assignment
Obligations
Purchase Price
Purchased Receivables
Reserve Account
Reserve Percentage
Security Interest
Settlement Date
Supporting Documents
Term
Termination Date
UCC
Uncollected Receivables
Verification Rights
Clauses
Purchase and Sale
Security Interest
Representations and Warranties
Covenants
Purchase Price and Fees
Collection and Payment
Account Administration
Reserve Account
Recourse
Assignment
Verification Rights
Notice Requirements
Events of Default
Remedies
Indemnification
Confidentiality
Term and Termination
Governing Law
Dispute Resolution
Force Majeure
Amendments
Notices
Entire Agreement
Severability
Waiver
Counterparts
Further Assurances
Survival
Security Interest
Representations and Warranties
Covenants
Purchase Price and Fees
Collection and Payment
Account Administration
Reserve Account
Recourse
Assignment
Verification Rights
Notice Requirements
Events of Default
Remedies
Indemnification
Confidentiality
Term and Termination
Governing Law
Dispute Resolution
Force Majeure
Amendments
Notices
Entire Agreement
Severability
Waiver
Counterparts
Further Assurances
Survival
Relevant Industries
Relevant Teams
Relevant Roles
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