How to Leave Your Factoring Company

How to Leave Your Factoring Company

The most important clauses in the contract define how to leave your factoring company.

Should a trucking company determine that services provided by the factor are unsatisfactory for any reason; the trucking company needs to have the choice to opt-out. Perhaps the two most important clauses in the contract for trucking companies are the clauses that define how to leave a factoring company.

Notice of Termination: In the factoring industry, almost all factoring agreements are subject to a Notice of Termination to end the contract. If the agreement is industry standard and subject to a 12 month term, then the expected Notice of Termination is 60 to 90 days in writing. There are no penalties to ending the contract in this fashion. If the factoring company does not receive notice, the contract is usually reinstated for another full term.

Early Termination: Ensure the contract contains an early termination policy; otherwise the client will be locked in for the full contract length. When reviewing this clause, it is important to understand how much it will cost to end the contract prior to its full term. Take extreme caution when evaluating this policy. Some factoring companies structure the early termination fees to be excessively high and thereby trap the trucking company with prohibitive penalties. To further add restrictive measures to keep the trucking company engaged, some factoring companies demand a long notification period during which time no funding is available. This is a dangerous trap that binds the hands of the trucking company by effectively ending all funding for months at a time.

Look for:a factoring company that provides the option to terminate the agreement easily by written notification with a nominal early termination fee.

Generally, the early termination fee is based on a percentage of the maximum credit limit associated with the account.

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