What is A Factoring Master Agreement (FMA)?

A Factoring Master Agreement is a legal contract between a business (the client) and a factoring company (the factor). Factoring is a financial transaction where a business sells its accounts receivable (invoices) to a third party (the factor) at a discount in exchange for immediate cash. The Factoring Master Agreement sets out the terms and conditions governing the factoring relationship between the client and the factor.


Here are some key components typically included in a Factoring Master Agreement:

  1. Parties involved: The agreement will clearly identify the client (the business selling its invoices) and the factor (the company purchasing the invoices).
  2. Scope of agreement: The agreement will specify the types of invoices or accounts receivable that are eligible for factoring. It may also outline any limitations or exclusions.
  3. Purchase price and fees: The agreement will detail the purchase price or discount rate that the factor will apply to the invoices. It will also outline any fees associated with the factoring arrangement, such as service fees or administrative fees.
  4. Term: The agreement will specify the duration of the factoring relationship, including the initial term and any renewal periods.
  5. Payment terms: The agreement will outline the terms of payment, including when and how the factor will pay the client for the invoices it purchases.
  6. Rights and obligations: The agreement will outline the rights and obligations of both parties, including the client’s obligation to provide accurate invoice information and the factor’s obligation to pay for valid invoices.
  7. Confidentiality and non-disclosure: The agreement may include provisions regarding the confidentiality of the factoring relationship and the client’s sensitive financial information.
  8. Termination: The agreement will specify the conditions under which either party may terminate the factoring arrangement, including any notice requirements or penalties.
  9. Dispute resolution: The agreement may include provisions for resolving disputes between the client and the factor, such as through mediation or arbitration.
  10. Governing law: The agreement will specify the governing law that applies to the factoring relationship and any disputes that may arise.


Overall, the Factoring Master Agreement provides a legal framework for the factoring relationship, ensuring that both parties understand their rights and obligations and helping to minimize the risk of disputes or misunderstandings.