Receivables Purchase Agreement Template for the United States

A Receivables Purchase Agreement is a specialized commercial contract that governs the sale and transfer of accounts receivable from your business to a financial institution or factoring company. This agreement allows you to convert outstanding invoices into immediate cash flow while transferring collection responsibilities to the purchaser. Under United States law, these agreements must comply with complex federal and state regulations to ensure valid transfers and protect all parties involved.

When do you need this document?

You need a Receivables Purchase Agreement when your business requires immediate cash flow from outstanding invoices rather than waiting for customer payments. This situation commonly arises during seasonal cash flow gaps, rapid business expansion, or when pursuing new opportunities that require upfront capital. Small and medium-sized businesses frequently use these agreements to maintain operations while customers take 30, 60, or 90 days to pay invoices. Manufacturing companies often utilize receivables purchase agreements to fund raw material purchases, while service businesses may use them to cover payroll during project completion phases.

Key legal considerations

The most critical aspect of any receivables purchase agreement is establishing a "true sale" rather than a secured loan, which affects bankruptcy treatment and regulatory compliance. Your agreement must clearly define eligible receivables, including credit quality standards, aging requirements, and excluded accounts. Representations and warranties sections require careful attention, as you typically guarantee the validity and collectibility of sold receivables. The purchase price mechanism, including discount rates and holdback provisions, directly impacts your cash flow and risk exposure. Collection procedures and servicer responsibilities must be clearly defined, especially regarding customer relationships and collection methods. Recourse provisions determine your liability if customers fail to pay, significantly affecting your ongoing financial obligations.

Legal requirements in United States

United States receivables purchase agreements must comply with the Uniform Commercial Code, particularly Article 9 governing secured transactions and perfection requirements. You must ensure proper filing of UCC-1 financing statements to perfect security interests and protect the purchaser's rights against other creditors. When consumer receivables are involved, compliance with the Truth in Lending Act becomes mandatory, requiring specific disclosures and terms. The Fair Debt Collection Practices Act governs collection activities, limiting how purchasers and servicers can interact with your customers. Federal Assignment of Claims Act applies when selling receivables from government contracts, requiring specific approval procedures. State UCC variations may impose additional requirements, including notification procedures to account debtors and specific contract terms. The agreement must also address compliance with the Fair Credit Reporting Act when credit information about your customers is shared or used in collection activities.