Account Receivable Purchase Agreement Template for United States

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Key Requirements PROMPT example:

Account Receivable Purchase Agreement

"Need an Account Receivable Purchase Agreement for our manufacturing company to sell $5 million worth of receivables to ABC Financial Services, with monthly purchases starting March 2025 and including recourse provisions in case of default."

Document background

The Account Receivable Purchase Agreement serves as a crucial financial instrument for businesses seeking to improve their cash flow through the monetization of their accounts receivable. This document, commonly used in the United States and governed by the UCC, enables companies to access immediate working capital by selling their receivables to financial institutions or specialized factoring companies. The agreement comprehensively addresses key aspects including purchase price calculations, risk allocation, collection procedures, representations and warranties, and compliance with applicable regulations. It's particularly valuable for businesses experiencing rapid growth, seasonal fluctuations, or those requiring immediate working capital without taking on traditional debt.

Suggested Sections

1. Parties: Identifies the seller and purchaser of the accounts receivable

2. Background/Recitals: Explains the context and purpose of the agreement

3. Definitions: Defines key terms used throughout the agreement including Eligible Receivables, Purchase Price, Collection Period

4. Purchase and Sale: Core provisions detailing the transfer of receivables, true sale provisions, and assignment mechanisms

5. Purchase Price and Payment Terms: Specifies pricing methodology, payment mechanisms, and timing of payments

6. Representations and Warranties: Statements of fact and assurances from both parties regarding capacity, authority, and receivables quality

7. Covenants: Ongoing obligations of the parties including reporting requirements and operational commitments

8. Administration and Collection: Procedures for managing and collecting receivables, including reporting and remittance requirements

9. Events of Default: Circumstances constituting default and consequences thereof

10. Term and Termination: Duration of the agreement and circumstances under which it may be terminated

Optional Sections

1. Security Interest: Additional security provisions when required beyond the receivables themselves

2. Servicing Provisions: Detailed arrangements for ongoing servicing of the receivables when seller maintains collection responsibility

3. Cross-Border Provisions: Specific provisions for handling international receivables and multiple jurisdictions

4. Insurance: Requirements for insurance coverage and related obligations

Suggested Schedules

1. Schedule of Receivables: Detailed list and description of receivables being purchased

2. Eligibility Criteria: Specific criteria determining which receivables qualify for purchase

3. Form of Purchase Notice: Template document for notification of new receivables purchases

4. Form of Assignment: Standard template for formal assignment documentation

5. Form of Notice to Debtors: Template for notifying debtors of the assignment of receivables

6. Pricing Schedule: Detailed methodology for calculating purchase price and related adjustments

7. Collection Procedures: Detailed protocols and procedures for collecting receivables

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

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Manufacturing

Wholesale Distribution

Financial Services

Retail

Technology

Relevant Teams

Finance

Treasury

Legal

Accounting

Credit Control

Relevant Roles

Chief Financial Officer

Treasury Manager

Credit Manager

Financial Controller

General Counsel

Industries

Uniform Commercial Code (UCC): Core legislation governing commercial transactions, particularly Article 9 (Secured Transactions), Article 2 (Sales), Article 3 (Negotiable Instruments), and Article 4 (Bank Deposits and Collections)

Federal Assignment of Claims Act: Federal law governing the assignment of claims against the United States government

Truth in Lending Act: Federal law requiring disclosure of consumer credit terms and standardizing the manner in which costs associated with borrowing are calculated and disclosed

Fair Debt Collection Practices Act (FDCPA): Federal law that limits the behavior and actions of debt collectors who are attempting to collect debts on behalf of another person or entity

Fair Credit Reporting Act (FCRA): Federal law that regulates the collection of consumers' credit information and access to their credit reports

State-Specific UCC Variations: Individual state implementations of the UCC, which may contain variations from the model code

State Usury Laws: State-specific regulations governing maximum interest rates and charges that can be imposed on financial transactions

Securities Acts: The Securities Act of 1933 and Securities Exchange Act of 1934, relevant if the receivables are securitized

U.S. Bankruptcy Code: Federal law governing bankruptcy, including provisions on true sale vs. secured lending, automatic stay, and fraudulent transfer rules

Internal Revenue Code: Federal tax regulations affecting the treatment of receivables purchases and factoring transactions

Bank Secrecy Act: Federal law requiring financial institutions to assist government agencies in detecting and preventing money laundering

USA PATRIOT Act: Federal law expanding anti-money laundering requirements and imposing additional compliance obligations

Consumer Financial Protection Bureau Regulations: Federal regulations protecting consumers in the financial sector, including rules on debt collection and credit reporting

Gramm-Leach-Bliley Act: Federal law requiring financial institutions to explain their information-sharing practices and protect sensitive data

State Privacy Laws: State-specific regulations governing the collection, use, and protection of personal information in financial transactions

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