Can a factoring company charge an early termination fee?

Many agreements include minimum volume, term, or exit fees — the signed contract controls. Compare the fee to the cost of staying through the notice period. This is education, not legal advice; talk to an attorney about your agreement.

What is a factoring release letter?

It tells your customers that the factor no longer owns the receivables and where to remit payment. Without a release, customers may keep paying the old factor while you switch funders.

How does UCC Article 9 apply?

Factors perfect interests in receivables under UCC Article 9. When the relationship ends, termination statements (see UCC § 9-513) and proper notice to account debtors (see UCC § 9-406) help prevent double payment confusion.

Does LoanHelp factor invoices or cancel contracts?

No. LoanHelp is a referral service only. We do not negotiate factor contracts or legal releases.

How to Get Out of a Factoring Contract

Updated Oct 23, 2026 · LoanHelp editorial team · Editorial policy · Not financial advice

To leave a factoring relationship, follow the notice and buyout rules in your signed agreement, then clear UCC filings and customer payment instructions so nobody pays the wrong party.

Checklist

Locate your signed agreement and read the term length, auto-renewal clause, and written notice window.
Send non-renewal or termination notice exactly as the contract requires (certified mail or portal — follow the agreement).
Ask for a payoff or buyout figure that includes unpaid fees, reserve release timing, and any early-termination charge.
If a new funder buys the ledger, coordinate UCC-3 termination filings so customers know who to pay.
Request a release letter naming your customers so notices of assignment can be withdrawn under UCC Article 9.

Primary sources

See also recourse vs non-recourse factoring for how notice of assignment works before you sign with a new funder.

Common questions

Can a factoring company charge an early termination fee?: Many agreements include minimum volume, term, or exit fees — the signed contract controls. Compare the fee to the cost of staying through the notice period. This is education, not legal advice; talk to an attorney about your agreement.
What is a factoring release letter?: It tells your customers that the factor no longer owns the receivables and where to remit payment. Without a release, customers may keep paying the old factor while you switch funders.
How does UCC Article 9 apply?: Factors perfect interests in receivables under UCC Article 9. When the relationship ends, termination statements (see UCC § 9-513) and proper notice to account debtors (see UCC § 9-406) help prevent double payment confusion.
Does LoanHelp factor invoices or cancel contracts?: No. LoanHelp is a referral service only. We do not negotiate factor contracts or legal releases.

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