Updated 2026-05-19

Rebate

A return of part of the reserve after fees are settled.

Why it matters

A rebate returns a portion of reserve to the seller after all fees and deductions are settled, representing the difference between the reserve amount held and the actual charges applied. Not all factoring contracts include a rebate provision—some apply excess reserve to offset other obligations under the program. Understanding whether a rebate is contractually guaranteed or discretionary affects how sellers forecast cash flow from reserve releases. Rebates are most relevant in programs where reserve percentages are higher than typical fee costs.

How it appears in contracts

The rebate provision, when it exists, appears in the Reserve or Fee Settlement section of the factoring agreement. Common language specifies that after all fees, chargebacks, and other amounts due to the factor are deducted, any remaining balance in the reserve account is payable to the seller. The timing of the rebate is typically tied to the invoice payment date or a defined settlement cycle. Sellers should verify whether excess reserve is rebated automatically or requires a written demand, as some programs require active requests for reserve settlement.

Related terms

• Recourse
• Chargeback
• Notice of assignment
• UCC-1