Key facts
| Start with | Your agreement's term, automatic renewal, notice period and termination fee |
|---|---|
| Notice | In writing, by the method and to the address the agreement names |
| Brokers | Need a release from the old factor before they pay you or a new factor |
| UCC filing | After the conditions are met and you send a written demand, the factor has 20 days to terminate it (UCC 9-513) |
| Reserve | Usually settled after the old factor's open invoices are collected |
| Buyout | Some new factors pay off the old one's open invoices; terms vary |
Why brokers need a release
When you started factoring, your brokers got a notice of assignment telling them to pay the factor. Under UCC 9-406, once a broker has that notice, paying anyone else may not settle what it owes. So brokers will keep paying the old factor until it tells them otherwise.
That's why the old factor's letter of release (sometimes called a release of assignment) matters: it tells each broker the old factor no longer owns your new invoices. The new factor then sends its own notice of assignment.
Ending the UCC filing
Most factors file a UCC-1 financing statement with your state, which is public notice of their interest in your receivables. A new factor or lender will search for it.
UCC 9-513 says that, once the conditions are met (for sold invoices, when the brokers have paid them), the factor must file or send you a termination statement within 20 days after you send an authenticated (written or electronic, signed) demand. Then search your state's UCC records to confirm it's filed.
Plan the timing
Missing a notice window can renew some agreements automatically for another term. Find the dates first, put them on a calendar, and send notice early enough to meet the agreement's method and deadline.
Step-by-step transition
Read the agreement
Find the term end date, automatic renewal, notice period, how notice must be sent, termination fees, and what happens to open invoices and the reserve.
Line up the new factor
Get the new agreement and fee schedule in writing, and ask whether it will buy out the old factor's open invoices and what that costs.
Give written notice
Send notice the way the agreement requires (for example email and certified mail to the named address) and keep proof of the date sent.
Ask for a payoff or reconciliation
Request a list of open invoices, your reserve balance, any fees owed and the final amount, in writing.
Get letters of release to your brokers
Ask the old factor to release each broker, then have the new factor send its notice of assignment. Confirm with each broker's accounting team who they will pay.
Watch for misdirected payments
For a few weeks, check where each payment goes. If a payment for an old invoice reaches you, follow your agreement, which usually requires forwarding it to the old factor.
Terminate the UCC filing
Once the old factor's invoices are paid, send a written demand for a UCC termination and check your state's UCC records after 20 days.
Checklist
- Term end date and notice deadline on the calendar
- Termination fee known
- Written notice sent with proof of date
- Open-invoice and reserve reconciliation received
- Letter of release sent to every broker
- New factor's notice of assignment sent
- Each broker confirmed who it will pay
- UCC termination demanded and confirmed in state records
UCC termination demand letter
Use this only after the old factor's invoices have been paid. If they haven't, ask for a reconciliation first. Fill in what you know; blanks stay as [placeholders]. Nothing you type leaves your browser. Send it the way your agreement says notices must be sent, and keep proof of the date.
A template, not legal advice. If the factor doesn't respond, talk to an attorney licensed in your state.
FAQ
Can I switch factoring companies before my contract ends?
Often, but it depends on the agreement. Check for an early termination fee and notice rules. Some new factors offer a buyout of the old factor's open invoices, which can make an early switch possible.
What is a letter of release in factoring?
It's a letter from your old factor telling a broker it no longer owns your new invoices, so the broker can pay you or your new factor. Without it, brokers usually keep paying the old factor.
My old factor won't terminate its UCC filing. What can I do?
Send a written, signed demand. Under UCC 9-513, once the conditions are met (for sold invoices, when they've been paid), the factor has 20 days to file or send a termination. If it still doesn't, talk to an attorney licensed in your state.
What happens to my reserve when I leave?
Most agreements let the factor hold it until the open invoices are collected, then pay it out minus fees and any chargebacks. Ask for a written reconciliation and an expected release date.
Sources
Related tools and guides
- Factoring Help Center: how factoring works
- Factoring payment problem solver
- Factoring cost calculator
- Factoring contract checklist
- Invoice document checklist
- Recourse vs non-recourse factoring
- Factoring vs quick pay
- What to do when a broker doesn't pay
- Check a broker's FMCSA authority, free
- Cost per mile calculator
- Factoring companies in the THC directory
General information, not legal, tax or financial advice. Factoring agreements differ, and each state adopts the UCC with its own changes. Check your own agreement, and talk to a qualified attorney or accountant about your situation. Factoring companies can appear in the Trucking Help Center directory, including through paid partner listings. A listing is not an endorsement, and these guides and tools don't rank or favor any provider.