Switching factoring companies

Exiting a factoring agreement and moving to a new provider requires reviewing termination terms, coordinating UCC lien transfers, and updating customer payment instructions.

Key takeaways
  • Review the notice period and termination fee formula before starting any exit process.
  • A UCC lien must be terminated by the old factor before the new factor can file a clean UCC-1.
  • Customers must receive an updated notice of assignment redirecting future payments.
  • Outstanding funded invoices should be settled before the old agreement closes to avoid reserve disputes.

Switching factoring companies is a multi-step process that involves the old agreement, the new agreement, outstanding invoices, UCC filings, and customer payment redirections.

Missing any of these steps can result in overlapping obligations, disputed customer payments, or a delayed lien release that blocks the new factor from funding.

Steps to review before switching

  • Read the termination clause and identify the exact notice deadline and required format.
  • Calculate any early termination or exit fee under the current agreement.
  • Confirm the process and timeline for UCC-3 lien termination with the old factor.
  • Determine which outstanding invoices are still funded under the old agreement.
  • Negotiate the new agreement before giving termination notice to the old factor.
  • Plan the customer notification timeline so payment directions are updated without overlap.

UCC lien overlap

If the old factor has not filed a UCC-3 termination and the new factor files a UCC-1, a priority conflict may arise. Verify lien termination timing with both parties before the switch date.

UCC-3 amendment

A filing used to amend, continue, or terminate an existing UCC-1 financing statement. A termination by UCC-3 releases the filed security interest. The new factor will typically require confirmation before filing its own UCC-1.

Reserve and outstanding invoices

Reserve held under the old agreement is released according to that contract, not the new one. Outstanding invoices funded by the old factor remain subject to the old recourse period and chargeback triggers even after the new agreement begins.

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.
  • Uniform Commercial Code Article 9 - Uniform Law Commission. Accessed 2026-05-19. Reference for secured transactions concepts including receivables and filings.
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.