FACTORING AND SECURITY AGREEMENT (CANADA)
THIS AGREEMENT made effective as of the _____ day of ______________, _______.
[NAME OF SELLER]
- and -
[NAME OF BUYER]
WHEREAS Seller wishes to obtain short-term financing by factoring, selling and assigning to Buyer
certain acceptable accounts receivable in accordance with the terms of this Agreement at a discount below
face value and on recourse, as set in this Agreement.
(a) “Account” means any right to payment for any reason whatsoever including but not limited to
goods sold, leased or delivered, or services provided, or refunds due, as sold and assigned to the
Buyer pursuant to this Agreement, including but not limited to those Accounts set out in
Schedule “A” attached.
(b) “Acceptable Account” means an Account in respect of which all of the representations and
warranties set forth herein are true and accurate, including the Accounts set out in Schedule “A”
(c) “Buyer” means the buyer of Accounts from the Seller as set out above.
(d) “Seller” means the seller and assignor of the Accounts as set out above.
(e) “Credit Problem” includes any circumstance which may adversely affect a Customer’s ability to
pay of its obligations (including any Account) when due.
(f) “Customer” means Seller’s customer or the account debtor of any Account purchased by Buyer
pursuant to this Agreement.
(g) “Customer Dispute” means any claim by customer against Seller, of any kind whatsoever, valid
or invalid, that reduces the amount collectible from Customer by Buyer in respect of any Account
purchased by Buyer.
(h) “Interest Rate” means the rate of ##% per year, which will be charged on any and all overdue
payments from Seller to Buyer of any kind whatsoever under this Agreement.
2. Representations, Warranties And Covenants By Seller
As an inducement for Buyer to enter into this Agreement, and with full knowledge that the truth and
accuracy of the representations and warranties of Seller in this Agreement are being relied upon by Buyer
instead of the delay of a complete credit investigation, Seller represents and warrants that the following
statements are true and correct, and covenants that the same will remain true and correct for so long as
any amount remains owing to Buyer hereunder:
(a) Seller is properly licensed and authorized to operate its business.
(b) The complete and proper legal name of Seller is as set out above, and Seller has no French version
of such name.
(c) Seller’s business is solvent.
(d) Each Customer’s business is solvent, to the best of Seller’s information and knowledge.
(e) Seller is, at the time of purchase by Buyer, the lawful owner of and has good and undisputed title
to the Accounts purchased by Buyer.
(f) Customer shall have no right of set-off, abatement or reduction whatsoever in respect of any
Account which is offered for sale by Seller to Buyer.
(g) Each Account offered for sale to Buyer is an accurate statement of indebtedness by Customer to
Seller for a certain sum which is due and payable in thirty (30) days or less.
(h) Each Account offered for sale to Buyer is an accurate statement of a bona fide sale, delivery and
acceptance of merchandise or performance of service by Seller to Customer, or other good and
valid liability of the Customer in question to the Seller.
(i) The execution and delivery of this Agreement by Seller have been duly authorized by all
necessary corporate acts on the part of Seller and is enforceable against Seller in accordance with
(j) Seller does not own, control or exercise dominion over, in any way whatsoever, the business of
any Customer whose Account is to be factored by Seller to Buyer.
(k) All financial records, statements, books, or other documents shown to Buyer by Seller at any
time, either before or after the signing of this Agreement, are true and accurate.
(l) Seller will not, under any circumstances or in any manner whatsoever, interfere with any of
Buyer’s rights under this Agreement.
(m) Seller will not factor or sell Accounts except to Buyer for the term of this Agreement as
(n) Seller will not offer any Account to Buyer which is not an Acceptable Account. By offering any
Account to Buyer, Seller shall be deemed to have represented and warranted that such Account is
an Acceptable Account.
(o) Seller has not and will not transfer, pledge or give security interest in any of its Accounts to any
other party unless, prior to the sale of such Account to Buyer, such pledge or security interest
shall have been released in writing.
(p) Seller will discharge all taxes, levies or assessments imposed upon it or incurred by it in the
operation of its business as and when same become due.
(q) Seller will not change or modify the terms of the original Account with Customer unless Buyer
first consents to such change in writing. For example, Seller may not extend credit to a Customer
beyond sixty (60) days without prior written consent from Buyer.
(r) Seller will not permit any lien, security interest or encumbrance to be created upon its fixtures,
inventory or property except with prior notice thereof to Buyer.
(s) Seller will maintain such insurance covering Seller’s business and/or the property of Seller’s
Customers as is customary for businesses similar to the business of Seller and, at the request of
Buyer, name Buyer as a loss payee of such insurance.
(t) Seller will notify Buyer in writing prior to any change in Seller’s place of business, or if Seller has
or acquires more than one place of business, or prior to any change in Seller’s chief executive
office, the office or offices where Seller’s books and records concerning accounts receivable are
(u) Seller will immediately notify Buyer of any proposed or actual change of Seller’s name, identity,
legal entity or corporate structure.
(v) The purpose of this funding is commercial in nature, and not for household, family or personal
(w) Seller acknowledges receipt of a signed copy of this Agreement.
3. Transfer and Assignment of Initial Accounts
The Seller hereby sells, transfers and assigns all of its right, title and interest in the Accounts set out in
Schedule “A” hereto to the Buyer. In return for this transfer and assignment the Buyer agrees to
immediately advance the Seller the sum related to these Accounts as calculated in accordance with
paragraph ___ below, in payment for such Accounts.
4. Transfer and Assignment of Future Accounts
(a) Assignment: Seller shall from time to time at Seller’s option sell, transfer and assign Acceptable
Accounts to Buyer, which Accounts shall be identified by separate and subsequent written
assignments on a form to be provided to Seller by Buyer or in written correspondence between
Buyer and Seller. The Seller hereby sells, transfers and assigns all of its right, title and interest in
those Accounts to the Buyer. In return for that transfer and assignment the Buyer will
immediately advance the Seller the sum related to these Accounts as calculated in accordance
with paragraph ____ below in payment for those Accounts.
(b) Approval: Buyer shall not have any obligations to purchase an Account unless such Account is
first submitted to Buyer by Seller for written approval by Buyer, provided however that Buyer is
not obligated to buy any Account from Seller and may decline to purchase any Account for any
5. Procedures Re: Factoring Of Accounts
(a) Discount: Buyer agrees to buy Acceptable Accounts from Seller at a discount fee of ##% from the
face value of each Account, payable at the time of assignment.
(b) Notification: At any time following transfer of an Account to Buyer, Buyer may at its sole
discretion notify any Customer of Seller to make payments to directly to Buyer.
(c) Recourse: Buyer will have immediate recourse against Seller when an Account is not paid in by
Customer when due, and Seller shall be liable to pay and shall immediately pay to Buyer an
amount equal to 100% of the amount of the amount outstanding under the Account plus interest
at the Interest Rate until payment in full. Seller hereby indemnifies Buyer and saves it harmless
from all Buyer losses of any kind whatsoever arising from any default or failure by a Customer to
make payment in full of an Account transferred to Buyer as and when same comes due.
(d) Payment of Disputed Account: Seller will immediately pay to Buyer the full amount of any account
subject to a Customer Dispute of any kind whatsoever, with interest at the Interest Rate from the
date of demand for payment from Seller.
(e) Charge Back: If a Seller does not fully and immediately settle a Customer Dispute, Buyer may, in
addition to any other remedies under this Agreement, charge or re-assign the Account to Seller
and the Seller will immediately pay the Buyer the full amount then outstanding for the Account
charged back, with interest at the Interest Rate from the date of notice of re-assignment from the
(f) Charge-Back For Invoicing Error: Mistaken, incorrect and/or erroneous invoicing submitted by
Seller to Buyer may at Buyer’s discretion be deemed a disputed invoice and be charged-back to
Seller on the same terms set out in paragraph ___.
(g) Notice of Dispute: Seller must immediately notify Buyer of any disputes between Customer and
(h) Settlement of Dispute: Buyer may settle any dispute directly with the Customer as it sees fit. Such
settlement does not relieve Seller of final responsibility for payment of the full amount of such
(i) Statement of Charge-Back: Buyer shall identify in writing all charge-backs and provide to Seller a
written statement thereof. Said statement shall be deemed an “ACCOUNT STATED” between
Seller and Buyer as to said charge-backs except for any errors of which Seller shall have notified
Buyer in writing within (15) days after the date of receipt by Seller of said statement.
(j) Sole Property: Once Buyer has purchased an account, the payment from Customer as to that
account is the sole property of Buyer without limiting Seller’s continuing liability therefor. Any
interference by Seller with this payment will result in civil and / or criminal liability.
(k) Hold in Trust: Seller will hold in trust and safekeeping, as the property of Buyer, and immediately
turn over to Buyer the identical cheque or other form of payment received by Seller, whenever
any payment on an Account purchased by Buyer comes into Seller’s possession. Should Seller
come into posses