Reserve release

When the factor pays the seller the held-back portion after the customer pays and fees are deducted.

Why it matters

Reserve release timing depends on customer payment, fee deductions, and any holds applied under the factoring agreement. The reserve is not released until the funded invoice is fully paid by the customer and all charges are settled. If the customer pays partially, reserve may be partially released. Cross-collateral provisions can hold reserve on fully paid invoices to cover shortfalls on other invoices from the same program. Sellers should track reserve balances through the factor portal and verify that released amounts match the expected calculation.

How it appears in contracts

The reserve release schedule is defined in the Reserve Account or Payment Timing section of the factoring agreement. Common triggers: the customer payment clears the factor account and all fees and deductions for that invoice are applied. Some agreements release reserve on a batch cycle rather than invoice by invoice. Cross-collateral language in the agreement may allow the factor to delay release beyond the standard schedule when other program obligations remain outstanding. Sellers should confirm whether reserve is released automatically or requires a request, and whether partial customer payments trigger partial reserve release.

Related terms

Related article: What is invoice factoring?

Related reading

Sources

  • International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.