Event of default
A listed problem that lets the factor use default rights.
Why it matters
Default events can trigger funding suspension, accelerated repayment demands, and factor enforcement of UCC security interests against receivables without further notice. Common events of default include: failure to maintain minimum volume, breach of representations, submission of ineligible invoices, insolvency or bankruptcy filing, or material change in ownership. Not all defaults trigger immediate termination: cure periods allow sellers to fix certain breaches within a defined window. Understanding which defaults have cure periods and which do not helps sellers assess operational risk.
How it appears in contracts
Events of default are defined in the Default or Events of Default section of the factoring agreement. After an uncured default, the factor may: suspend new funding, declare all obligations immediately due, apply reserves against amounts owed, and pursue collection under the UCC security interest. Some agreements include a cross-default clause: a default under any other credit facility the seller has may also constitute a default under the factoring agreement. Sellers with multiple lenders should review cross-default language carefully before entering a factoring arrangement.
Related terms
Related reading
Sources
- Uniform Commercial Code Article 9 - Uniform Law Commission. Accessed 2026-05-19.
- International Factoring Association - International Factoring Association. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.